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JANUARY FEBRUARY MARCH 2013

IN THIS ISSUE NATIONAL NEWS PAGE 2

SPECIAL REPORT: Panelists Predict Multifamily Industry Will Decelerate in ‘13

LOCAL EFFECTS PAGE 4

Still Not Much Momentum in Las Vegas Apartment Market MGM Resorts Sells 427 Condo Units at CityCenter Las Vegas for $119M

MANAGEMENT MINUTE PAGE 7 Build Powerful Property Management Incentive Programs

OCCUPANCY CORNER PAGE 10 MARKET ACCESS PAGE 11 ACCESSLASVEGAS

Less Apartment Refinancing, More Funding in 2013 The last few months brought good news for the U.S. housing market: construction up, more home sales, and home value growth turning positive. This has been a big change from a year ago. Given that, what are the crystal ball predictions for housing in 2013? Mortgage Rates Stay Low. Look for fixed-rate mortgage rates to remain near their 65-year record lows for the first half of 2013 then begin rising a bit in the tail end of next year. In the single-family market, this means homebuyer affordability should remain very high in 2013 for those with good credit history, stable income, and sufficient savings. Home Values Rise. Look for property values to continue to strengthen in 2013: projections are most U.S. house price indexes will likely rise by 2 to 3 percent in 2013. Like always, national statistics don’t tell the full story; some regions will post faster house price gains, while some will be stagnant or see value loss in 2013. Vacancy Rates Down. Vacancy rates have been trending lower for much of the past three years because household formations have outpaced new construction. To illustrate, in 2012, net household formations through the third quarter totaled 1.15 million but completions of newly built homes (both rental and for sale) were just under 700,000; the difference is made up by a reduction in vacancies. This trend will continue in 2013 and could bring total vacancy rates down to levels last seen a decade ago. While this is good news for property owners, tenants will likely see rents rise a bit faster than prices on all other goods. Less Refinancing, More Apartment Funding. Refinance activity accounted for the bulk of residential lending in 2012 and will account for the bulk of it in 2013, too. But, simply put, we've seen the peak in refinancing. Homeowners who obtained a loan with a low mortgage rate in 2012 or refinanced through the Home Affordable Refinance Program are unlikely to refinance in 2013. Next year’s likely pickup in home sales won’t be enough to offset the coming drop in refinance activity. Consequently, total single-family originations will probably drop by about 15 percent in 2013. On the other hand, permanent financing on newly built apartment buildings, a pickup in property transactions, and refinancing of loans exiting "yield maintenance" terms are expected to increase multifamily lending by about 5 percent. Best wishes for a healthy and prosperous 2013! JANUARY | FEBRUARY | MARCH 2013


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SPECIAL REPORT: Panelists Predict Multifamily Industry Will Decelerate in ‘13 By Keet Fong; MHN Online 2012 will go down in the record books as another chart-popping year for the multifamily sector, but the exuberant levels of multifamily rent increases, transactional activity and equity investments are due for a slowdown over the next year, suggested speakers at the 2012 CREW Network Convention and Marketplace held in Chicago. “This is one of our best years ever,” said Debbie Corson, principal, Apartment Realty Advisors. Corson was the moderator on a panel focusing on the multifamily sector. Absorption has accelerated in 2012 and as a result, rents have continued to increase in 2012 even in the Midwest, said Corson. The level of transactions, meanwhile, has risen significantly from the lows hit in 2009 and 2010. This year, $16.2 billion in sales were registered in the second quarter. The average cap rate, 6.2 percent in the second quarter, continues to experience compression pressure, said Corson. 2012 is “pretty much as good as it gets,” agreed David Schwartz, managing member of Waterton Associates. Schwartz said revenue growth for Waterton’s portfolio is 7 percent. However, he predicted that the rate of rent increases for his company’s properties will decrease in 2013 from 5 percent in 2012 to 3.5 percent, a level he noted is closer to historical rent growth averages of 3 percent a year.

The prices at which properties exchange hands are now exceeding replacement costs, but “credit has not boomed,” said Blumberg. Unfortunately, banks are not ready to execute a lot of construction financing yet, she noted. Blumberg said she did not seriously expect the fiscal cliff -- involving large scale spending cuts and tax increases -- to ultimately occur. “No one will have to jump,” she said. Matt Wakenight, senior vice president investments at Equity Residential, said that he was bullish with regards to prospects for the sector. Rent growth for EQR’s portfolio is 4 to 5 percent, he reported. Wakenight acknowledged there was a lot of apartment supply being delivered in the major markets, but the REIT expects that apartment supply in its markets will be absorbed very quickly. Panelists also agreed that the level of apartment investments have and will come down somewhat, at least until U.S. and global uncertainties are lessened. ARA’s Corson said that investors are holding onto capital, and they are bidding at lower pricing and higher yields. Corson said that some slowdown in transactional volume was experienced in the last quarter. However, there is still a lot of private equity seeking yields -- but these players are exiting the “Sexy Six” to go to the secondary markets.

Schwartz suggested that the causes of decreases in the rate in rent growth next year will be increases in the level of multifamily construction, which is occurring in most major cities, and a slow-growth economy, in which GDP increases will continue to be sub-3 percent.

Schwartz noted that pension funds are “pretty cautious” now, and they are “holding onto cash” in view of the fiscal cliff, slowdown in China and European recession. He said the Mideast instability and European crisis will have to move towards resolution before the pensions will “feel better about the world.”

Susan Blumberg, senior vice president and managing director, NorthMarq Capital, agreed that revenue growth in the apartment industry in 2012 has been robust, increasing by 7 percent to as high as 15 percent. Rent growth has been generated by both rent increases as well as burn off of concessions, she said. Blumberg said annual rent growth of about 4 percent is expected going forward.

Wakenight said there was previously typically “a long line out the door” of investors wanting to purchase non-major market properties being unloaded by EQR. The interest from investors is still there, but they are more constrained by limits to the maximum price they are willing to pay.

“ ... the level of apartment investments have and will come down somewhat, at least until U.S. and global uncertainties are lessened. Investors are holding onto capital, and they are bidding at lower pricing and higher yields.”

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7 Fearless Predictions for the Future By Spencer Cullor; Apartment Vestors

• Reduced discretionary income

As the year quickly comes to an end, we’d like to take a look into our crystal ball at what the future holds for the multifamily real estate investment market. To do this, we’ve compiled information from various industry sources from around the US and want to highlight some of the key findings with you.

• Continued shift to urban areas

7 Fearless Predictions for the Future Multifamily Investment Real Estate Market: 1) Multifamily sector expect to continue growth through 2015 and beyond. According to Freddie Mac, the multifamily market is predicted to keep growing through at least 2015, but the growth is likely to continue through at least 2020. 2) The multifamily sector growth and sales will continue to dominate all other real estate classes including commercial and single family homes. According to industry research, the multifamily investment market is predicted to continue to lead the way across all real estate sectors including commercial and single family homes.

• Tougher home-loan qualifications Predictions are fun to make, but what does this mean to our investing business?  We are moving forward and continuing to evaluate and buy multifamily properties with solid fundamentals and that have strong upside potential.  No one can predict the future, but the current market fundamentals all point to great things in store for the future of the multifamily investment market.  If our property’s performance this year is any indication of the future and where the market is heading, we feel great about the future’s potential. Hope you had a great end to 2012 and an amazing start to 2013.  If you currently own multifamily real estate or plan on owning some soon, your future is bright!

3) Multifamily sector will add 1.6-1.7 million new renters by 2015. Freddie Mac predicts that if the economic recovery remains slow, new demand will reach 1.6 million and if the recovery speeds up, demand will increase by 1.7 million renters. 4) Percentage of renters in the US will increase from 34% to 39-42%. 5) Multifamily demand will continue to outpace new supply.  Slow current multifamily construction pipeline of around 200,000 this year will not keep pace with increasing demand.  In addition 1-2% of current properties become obsolete each year and need replace increasing demand for current multifamily properties. 6) Home ownership rates will drop an additional 1-2% if slow economic recovery continues. 7) Rent growth, low vacancies, and increasing values for multifamily investment properties will continue into the foreseeable future. So, now that we have made these predictions based on industry research, what is fueling this growth? Let’s look at a few of the key factors to continued multifamily growth. These key factors all drive additional demand to multifamily rental housing. • High consumer and student loan debt • Flat to modest household income growth • Shifting job opportunities • Delayed Baby-Boomer retirement

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Still Not Much Momentum in Las Vegas Apartment Market By Greg Willett; Property Management Insider While the apartment sector in Las Vegas is no longer hemorrhaging revenues, your general outlook on the world has to be really rosy to find much to like about current results. Occupancy remains very weak, and there’s no real pricing power.

“Annual rent change in Las Vegas technically moved in positive territory for the first time in four years as of 2012’s 3rd quarter. But, with prices for new leases up just 0.1 %, the market crossed that barrier by the thinnest margin possible, and it certainly wouldn’t be surprising for change to be back in the red for the calendar year.” Breaking down the occupancy stats, the current average rate is 92.1 percent. Although that’s up about 300 basis points from the recession low seen in the market, it’s still likewise about 300 basis points under the national norm. Furthermore, there really aren’t any product niches where occupancy has recovered fully. And only a couple of the neighborhoods with comparatively small stocks -- Green Valley and Southwest Las Vegas -- have managed to get occupancy back to the essentially full level. Annual rent change in Las Vegas technically moved in positive territory for the first time in four years as of 2012’s 3rd quarter. But, with prices for new leases up just 0.1 percent, the market crossed that barrier by the thinnest margin possible, and it certainly wouldn’t be surprising for change to be back in the red ACCESSLASVEGAS

for the calendar year. As with the metro’s occupancy results, there isn’t much to brag about on the pricing front across any product niche or neighborhood. Today’s effective rents in Las Vegas are a whopping 17 percent or so under pre-recession levels. That hole is far deeper than is seen anywhere else across the country. Annual employment change has consistently proved positive in Las Vegas since about the middle of 2011. Even in that seemingly encouraging metric there’s some cause for concern, however, as the latest info shows the metro’s performance slowing and starting to flirt with net job loss once again. The preliminary figures for October from the Bureau of Labor Statistics showed just under 4,000 jobs added on an annual basis. That’s only a third of the pace of growth recorded at the same time in 2011. Las Vegas seems to continue to have a still-long road to recovery ahead of it.

MGM Resorts Sells 427 Condo Units at CityCenter Las Vegas for $119M By Scott Baltic; Commercial Property Executive A bulk condo closing of a $119 million sale of 427 residences at Veer Towers in Las Vegas’ CityCenter project suggests that while the metro area’s luxury condo market hasn’t yet recovered, confidence is growing to the point where recovery isn’t too, too far away. The twin 37-story towers, designed by Murphy/Jahn, each comprise 335 residences, including studios; one-, two- and three-bedroom units; and penthouses ranging from 500 to nearly 3,300 square feet. The 427 units just sold represent all but 11

units (all penthouses) of 438 Veer Towers units previously held as developer inventory. Veer Towers is now 98 percent sold out. The buyer, Commercial Property Executive learned, was LVT Owner L.L.C., whose majority investor is Ladder Capital, of New York. “We bought these condos in bulk on a reasonable basis. High-rise condos on the Las Vegas Strip are a supply constrained market, and the condos at Veer Tower are in a fantastic location surrounded by world-class amenities, including fine dining, casinos and entertainment,” Brian Harris, Ladder Capital’s founder and CEO told CPE. “Las Vegas is also one of the condo markets that has not yet come back, but we think it will.” “The price per unit looks like it was a very good deal for the buyer,” Shelli Lowe, managing director of Integra Realty Resources -- Nevada, told CPE, though she cautioned that she doesn’t know the price per square foot. “The prices on the Strip were as high as $1,300 at the Mandarin in the best of times. The Strip sales lately have been as low as $200 to $400 per square foot.” The 67-acre CityCenter is a joint venture between MGM Resorts International and Infinity World Development Corp, a subsidiary of Dubai World. In addition to Veer Towers, its only strictly residential buildings, the project includes the ARIA, a 61-story, 4,004-room gaming resort; luxury non-gaming hotels including the Mandarin Oriental and Vdara Hotel & Spa; and Crystals, a 500,000-squarefoot retail and entertainment district. When the sale was announced last Friday, Tony Dennis, executive vice president of CityCenter Residential, said the sale “comes at a time when the Las Vegas housing market is seeing sustained improvement.” In addition, Bobby Baldwin, president and CEO of CityCenter, commented that “A sale of this magnitude allows us to now concentrate on the sell out of The Residences at Mandarin Oriental, Las Vegas, our flagship residential property.” Those condos, in the upper half of a 47-story tower designed by Kohn Pedersen Fox Associates, comprise 225 residences, including one-, two- and three- bedroom homes ranging from about 1,110 to 4,000 square feet. JANUARY | FEBRUARY | MARCH 2013


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Company Linked to Dell Pays $93M for Pair of Vegas Multifamily Properties By Alex Girda; MHN Online WTI Inc., an entity with ties to computer manufacturer Dell, has paid $93 million for a pair of Las Vegas multifamily properties, VegasINC.com reports. The Renaissance Villas complex on West Tropicana Avenue commanded a staggering $75 million, while the Esplanade near South Durango Drive fetched $18 million. The seller’s identity was not immediately available. Completed in 1989, the 840-unit Renaissance Villas was renovated in 2006. Community amenities include high-speed internet access, jogging trails, picnic area with barbecue, swimming pools, hot tub, fitness center, and tennis and volleyball courts. In-unit amenities include all-electric kitchens, walk-in closets, appliances, private balconies and patios. At the Esplanade, located seven miles away, WTI bought 163 rental units. The complex’s other 219 units are condominiums that were not included in the transaction, VegasINC.com explained. VegasINC.com speculates that WTI is a stand-in for Dell, which bought WTI’s sister company, San Jose-based Wyse Technology, earlier this year for a rumored $1 billion. State records indicate that WTI previously operated under the name Wyse Technology Investments Inc. and shares a San Jose address with Wyse Technology, the online publication noted.

Calida Moves to Revive Stalled $350M Manhattan West Project By Alex Girda; MHN Online Four years after its original developer filed for bankruptcy, the $350 million Manhattan West condominium project may be getting new life. The Calida Group is moving to acquire the stalled 700-unit development on Russell Rd., the Las Vegas Review-Journal reports. Expected to fetch between $21 million and $23 million, the deal was spurred by the comeback of the area’s housing market. For its part, ACCESSLASVEGAS

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Calida Group is making a bid to join the ranks of Nevada’s most active multi-family developers, according to the Review-Journal. The company’s other major local projects include a 360-unit upscale apartment complex in Henderson. Manhattan West’s original developer, Gemstone Development, planned a 12-building mixed-use project that was to include 150,000 square feet of office space and 50,000 square feet of retail space as well as 700 condo units. According to the Review-Journal,  the residential units were priced in the $400,000 range, or about $300 per square foot. Floor plans and amenities aimed to emulate Manhattan-style characteristics. Manhattan West eventually hit financial troubles when Gemstone allegedly found faulty construction work at the site. A dispute with the project’s general contractor, Apco Construction, led to serious funding issues that caused the project’s shutdown.

Boo! Vegas “Ghost Inventory” Casts Shadow Over Housing Recovery By Hubble Smith; Las Vegas Review-Journal The real estate market in Las Vegas has reached bottom and prices have stabilized, but lingering concern about the "ghost inventory" in the single-family residential market is keeping the recovery in check, a panel of experts said this week at the Suncoast. There's still a lot of uncertainty over Assembly Bill 284, the Mortgage Debt Relief Act and dwindling inventory, said Rick Shelton, moderator at a symposium presented by the Las Vegas chapter of the Appraisal Institute. The other piece of the puzzle is the "ghost inventory" of nearly 80,000 homes that are 30 days or more delinquent on their mortgage, he said. "We didn't invite Bank of America, Wells Fargo and Chase because we keep hearing the same rhetoric that they're sitting on zero ghost inventory," Shelton said Thursday. "Banks realize they need to manage the release back into the market for stability in the short term. Kevin Mikrut of First Prime Realty Group said some appraisal issues have cropped up in Las Vegas because it's still considered a declining market, even though median home prices have been increasing for eight straight months. "Are these prices current right now? Maybe not," he said. "People are not looking at the future growth in that particular subdivision." The multifamily market has seen a slight boost in rents and a cutback in concessions, said Rondetta Troutman, executive vice president of Phoenix-based Picerne Management. JANUARY | FEBRUARY | MARCH 2013


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Boo! “Ghost Inventory� Continued She found that giving free rent was just creating a group of "skippers" who would move from one apartment to another for concessions. Instead, Picerne lowered the rent by $100 to $150 a month in 2008 and 2009. "We've gotten through the pain of lowering those rents," Troutman said. "I'm not sure if we've lifted them as far as we could, but we're actually getting a lift every single month." Jonathan Fore of Fore Property Co. sees rent growth of 3 percent to 4 percent over the next few years. He won't raise rents more than $50 a month on Class A apartments.

unencumbered by loans are much more attractive than assuming a loan at a higher rate, he said. Although it's a struggle to find tenants for retail, office and industrial properties, apartments are 90 percent occupied, he said. Investors have guaranteed cash flow and aren't gambling that they can stabilize assets. With fewer apartments on the market, institutional investors such as pension funds and hedge funds are purchasing pools of homes with the intention of renting them out, in essence creating an apartment community of single-family homes, McNamara said. Shelton said he had a group that bought 1,400 homes in Phoenix, and wants to buy 1,000 to 1,200 units in Las Vegas. They're getting a 10 percent annual return on rental income and will hold the property for three to five years and turn it for another 10 percent to 20 percent profit. Land values are still depressed in the Las Vegas Valley, said John Knott of Newmark Grubb Knight Frank. The good news is the market is starting to see large hedge funds and institutional investors willing to speculate if they have the resources, he said. "Look at how they bought land in the 1970s and 1980s. That opportunity exists today," he said. "You can take care of your children forever. Las Vegas will continue to grow because of population growth in the Southwest." Knott said the unfinished Fontainebleau on the Strip needs to open or at least resume construction before land prices start increasing in the resort corridor. "Fontainebleau is not going to be knocked down," he said. "I was just in Carl Icahn's office a couple weeks ago and they're looking for an opportunity to sell that property at development price. It's not going to sell for full construction cost, but for a discount. I don't think he's going to sell for $150 million, probably $400 million, maybe higher. The cost to finish it is $1 billion to $1.5 billion."

Multifamily developers have to take advantage of the most desirable locations and spend a little more on the amenities package to differentiate from the single-family market, he said. Troutman said the main competition for multifamily residential is single-family homes that are renting for $600 to $800 a month. That's going to keep apartment rents from getting to $1,400 a month again, she said. Current appetite for multifamily properties is unprecedented due to low interest rates and depressed real estate values, said Ryan McNamara of B&R Property Management, which manages about 5,500 units in Las Vegas. "We're getting constant calls from investors looking to purchase multifamily assets, mostly (Class) A and B products," McNamara said. "Distressed is preferred, even though there's not a lot left in the distressed market." Low interest rates are driving prices, he said. Multifamily deals ACCESSLASVEGAS

The earliest it would open is 2016, he said. One of the "silver linings" for land in Las Vegas is the "flight to quality," Voit Real Estate Services managing director Mike Montandon said. Properties in less desirable locations are getting weeded out, he said. JANUARY | FEBRUARY | MARCH 2013


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Build Powerful Property Management Incentive Programs When evaluating the success of your incentive program, look for any side benefits you didn’t expect, such as a new spirit of enthusiasm, reduced turnover or increased teamwork.

By: Ernest F. Oriente, The Coach at PowerHour.com Want to build a successful incentive program for your property management company?  Have you dreamt about finding ways to have more fun at work and still see big results?  At the heart of every employee incentive program is the ability to motivate and reward your property management team for excellent performance.  In this article, I will show you four easy steps to build an incentive program that allows everyone to win! Setting objectives:  For any type of employee incentive program, your property management team must feel the goals are attainable and realistic.  An incentive program should also fit into your company’s overall business strategy and be easy to measure.  Using targets such as revenue growth, occupancy, resident retention and NOI, are some of the ways to establish incentive objectives.  In addition, the ideal incentive program will allow each person in your company to feel they have an opportunity to win. Tip From The Coach:  To build a powerful incentive program, plan a brainstorming session with a few of your key resident managers and property supervisors so they can share unique insight about ways to make the program a giant success.  Listen to their input, as they will lead you to the gold! Developing a strategy:  Be certain your objectives are simple and well defined.  Then, do everything possible to ensure your company goals can be evaluated fairly and objectively.  For example, the occupancy at a property or the number of leases renewed each month can be easily measured.  Once you have outlined the goals to be measured, then build a specific schedule of how frequently you are going to report the progress of your incentive program.  For instance, if your incentive program is going to run for three months, then plan on announcing the rankings every two weeks, to keep top-of-mind awareness.  Lastly, clearly outline the rules of your incentive program in writing and define the specific time period to be measured.  ACCESSLASVEGAS

Tip From The Coach:  When building your strategy, be certain to focus on win/win.  Also, consider what will happen to morale if many participants within your property management company don’t -- or can’t -- achieve their incentive objectives. Establishing awards:  Start by establishing your budget for this incentive program by defining the projected number of awards to be given.  Then, consider the “people-profile” of your property management team to develop appropriate awards that will be memorable and the winners will take pride in receiving.  This is another great topic to brainstorm with a few of your key resident managers and property supervisors.  Given an open forum, they will tell you exactly what is important to them and to those they manage.  Tip From The Coach:  Your team will be most inspired if they feel the incentive rewards are meaningful enough to justify their efforts.  Some award ideas … a nice dinner with the President of your company, education/training classes paid for by the company, a paid day off with cash for shopping, a special plaque to reward top performers, special recognition at your next company meeting, or a trip to a vacation resort. Evaluating the results:  Bravo!  Your incentive program is completed and now is the time to evaluate the results and to justify the success of your program.  Start by getting feedback from your property management team by surveying them and asking for their feedback.  Ask them if the incentive program made a difference in their performance and ask for any suggestions they have to improve future programs.  Then, evaluate if the program helped your property management company achieve its goals while consider any improvements you would make for the next incentive program. Tip From The Coach:  When evaluating the success of your incentive program, look for any side benefits you didn’t expect, such as a new spirit of enthusiasm, reduced turnover or increased teamwork.

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Payment Processing, Present and Future There’s no doubt the industry has embraced mobile as an increasingly popular way to provide payment. Residents are alerted to payments due by text messages or mobilefriendly apps, and rents are drawn from their checking accounts through Automated Clearing House (ACH) transfers and other means. Mobile is so big it’s no longer a trend. It has transcended that term, says John Pendergast, senior vice president of client services with Santa Barbara, Calif.-based Yardi Systems. “The mobile population is not growing or increasing. Today, everyone is walking around with their smartphone or tablet,” he says. “If you’re preparing now to serve a mobile population, you’ve missed the boat.” Checks for the 21st Century In more emergent stages are innovations on payment’s back

end, which were made possible by the Check Clearing for the 21st Century Act, or “Check 21,” says Seth Harlem, vice president of partnerships with New York City’s Zipmark. The federal government opened the gates to payment innovation, especially as it affects billers such as property management companies, with the passage of the act in the early part of the last decade, according to Harlem. “Check 21 rules are what allow billers to scan paper checks and create a digital version that carries all the same guarantees as the paper artifact,” he says. “And there’s a great deal more that Check 21 enables. Zipmark, for example, has developed a 100 percent digital check payment platform that completely eliminates the need for a paper check. The Zipmark software creates the check image that

receivables process for our customer properties.” Another notable payment processing trend is kiosk-oriented rent collection. Some property management companies are opening kiosks at larger retail chains like Wal-Mart. “If you’re going to WalMart this Saturday, you can write your rent check right there,” Pendergast says. “That kiosk service knows how to funnel the funds back to the correct property management bank account and how to send it into the company’s software system.” Lower Transaction Costs Reflecting on a payment innovation conference called “Money 2020” he just attended in Las Vegas, Harlem reports the leading topic among the 2,000 payment professionals at the conference remains mobile technology. “It’s difficult to forecast what transaction triggers, such as digital wallets, will take the lead,” he adds. “For example, only time will tell whether the hype around near field communication (NFC) in payments will amount to significant adoption.” However, the conference made clear to Harlem that the ACCESSLASVEGAS

carries the same legal benefits as a paper check.” Yardi, offering online and mobile payments from any mobile device via its RENTCafé Portal, offers a check scan routine separate from RENTCafé. “You in the property management office run the check through a scanner, and we at Yardi capture an image of the check’s front and back and shoot it to the bank,” explains Pendergast. “The bank treats it just as a physical check.” NWP’s payment-processing product, Resident ePay,

provides a platform whereby payment can be made through multiple channels: online, mobile phone, voice response, in-person and scanner, says Cindy Style, Bloomingdale, Minn.-based product manager for Resident ePay with Costa Mesa, Calif.-based NWP. “Through those channels we provide multiple payment methods, [including] ACH, credit and debit cards, money orders, checks and even cash via Western Union agents,” Style says. “Our goal is to provide greater access for residents and improve the

NWP’s Resident ePay Service Eliminates The Needs to Write Checks

key beneficiaries of payment innovation in the years ahead will be, first, the unbanked and under-banked among renters, and second, the companies accepting payments. “There is an ever-increasing focus on enterprise payments, [meaning] the developments in payment processing will continue to reduce overall transactional costs and increase the number of payers paying electronically,” he says. “Businesses should not have to pay a two or three percent transaction fee simply for getting paid … I’m certain the pain businesses feel related to payment processing will be the leading driver in payment innovation.” Like Harlem, Style is convinced that the future will favor less costly payment methods. “We expect to see greater emphasis on the least expensive means of payment processing, ACH and PIN-based debit cards,” she says. Continued on Page 9

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Payment Processing Continued Also look for increased focus on security to battle credit card fraud, Style says. Resident ePay, for instance, doesn’t store credit card information on its servers or applications. Card numbers are stored with its credit card processor, and Resident ePay stores a reference number or token tied to that credit number for security purposes. Style foresees expansion of “tokenization” in years ahead. Chip-and-PIN technology, currently more widely used in Europe, incorporates a chip in the credit card that is read by a different type of reader and requires the user to enter a PIN. It helps ensure a more secure transaction than magnetic strips can deliver. “I would anticipate that eventually, Chip-and-PIN technology will be part of online payments for security purposes,” Style predicts. Pendergast foresees a decline in the prominence of the management office as payment processing evolves. “I would be guessing, but I think we’ll see the availability of the leasing office waning,” he says. Historically, he notes, an apartment resident sat down at the kitchen table, wrote a check, and walked it to the manager’s office for an inperson handoff. Today, Pendergast observes, “managers want the residents to pay online, because they don’t have to do anything. The availability of the property manager’s office to accept checks will wane over time.”

Change is Coming By Chris Lee and Keet Foong; CEL & Associates Inc. and MHN Online These are some futuristic predictions from Chris Lee, president and CEO of Los Angeles-based CEL & Associates Inc., a leading real estate consulting firm. Lee has just completed a book, “Transformational Leadership in the New Age of Real Estate,” which is available through the Institute of Real Estate Management. The book lays out the future of real estate and explains the need for executives of the future to be visionary.

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as proprietary research conducted by CEL & Associates,” says Lee. CEL & Associates conducts up to 500 interviews per year with leaders across the country. Here are some key findings: Level of Demand for Apartments …  By the year 2020, I expect the number of renters in the U.S. to increase from 34 percent to around 39 to 42 percent. While a portion of those renters will choose singlefamily homes owned by private equity investors, demand for apartments will dramatically increase. Most Important Demographic Group …  While the under-30-year-old demographic group will dominate, I expect the percent of renter-by-choice to increase in the 30- to 44-year-old group by 2 to 3 percentage points, and the over-65-year-old group to increase from 17 percent to slightly over 21 percent. Renting Behavior …  The shift to a more renter-based society will also increase demand for more urban, walkable communities with multiple adjacent assets (e.g. hospitals, entertainment centers, retail and grocery stores, proximity to employment centers, dining facilities, transit centers, educational institutions, and recreation areas). Apartment Industry’s View of its Product …  In the future, there may be more value given to the captured or accessible pool of residents than the replacement cost of the apartment community. Apartment owners will, by 2020, value and place greater emphasis on residents and the resident experience than on just maintaining the property. Apartment Branding …  There will be an increasing emphasis on company, community, service and experience branding. Branding will be more of a “renters’ voice” or experience than a fixed product or location. Apartment Lease Structures …  Apartment leases by 2020 will be “purchased” by units/length of stay (i.e. the longer the rental term, the less the monthly rent). For national owners and operators, apartment leases will be portable. Property Management …  The biggest change in how apartment companies approach onsite management will be the shift from process-driven to outcome-driven business practices. The term Resident Share will emerge as apartment operators seek to capture more of the residents’ “lifestyle expenditures.”

“The book was driven by my interactions with 500 real estate clients who are continually probing and asking questions about not only the information we have, but also what the information means, what the future holds and how to prepare for the future,” Lee tells MHN. “Business as usual will not guarantee success tomorrow. Leaders have to be transformational in how they approach the company and capture those opportunities.”

Multifamily Labor Market …  While I expect apartment industry employment growth to be incremental (i.e. the addition of more units), the biggest employment opportunity will come from a wave of retiring Baby Boomer-aged employees. The void left by their departure could create between 75,000 and 100,000 employment opportunities over the next decade.

While “Transformational Leadership” offers a roadmap to success factors for the future, it also closes with a series of futuristic predictions for real estate. MHN’s Executive Editor Keat Foong asks Lee about his predictions for the apartment industry in several categories of interest. Lee’s forecasts cover the next two real estate cycles over a 10-year period. “The predictions are based on my reading of tons of data from publications and research reports as well

Concluding Comments …  The future of the apartment industry is not just bright -- it is glowing. The combination of pent-up demand, demographic growth, aging stock, new urbanism and a shift to a more renter-based society will drive growth in this sector. The key to success for those in the apartment industry will not be “showing up,” but rather “living up,” to the potentials within one of America’s most dynamic real estate segments.

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OCCUPANCYCORNER PAGE 10

Y O U R A C C E S S T O T H E L A S V E G A S M U LT I - F A M I LY H O U S I N G M A R K E T

Las Vegas Metro Occupancy Results December 2011 through November 2012

December

90.17%

January

90.33%

February

90.62%

March

91.02%

April

90.59%

May

90.81%

June

90.38%

July

90.44%

August

90.34%

September

89.88%

October

90.05%

November

89.77%

87%

88%

89%

90%

91%

92%

12 Month Occupancy Average: 90.38% Source: Spencer Ballif and Jeff Swinger of CB Richard Ellis (Las Vegas) (118,620 Apartments Surveyed in August 2012)

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MARKETACCESS PAGE 11

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Las Vegas Multifamily Access Source: LoopNet

MULTIFAMILY PERFORMANCE HIGHLIGHTS – LAS VEGAS (Through September 2012) Multifamily Property Asking Price Index - Sale Trends Asking prices for multifamily properties have risen 9.5% versus last quarter to $38,792 per unit. For the year, asking prices have fallen 2.7% on the year. Asking prices for multifamily properties hit a three-year peak in December 2006 at $105,693 per unit. In comparison, the current median asking price is down by 58.9%. On the other hand, the lowest asking price in the past three years was seen in July 2012 at $35,387. Multifamily Property Sale Prices - Sale Trends In the past eight months, the median sale price per unit for multifamily properties in the metro area has gone up 9.5%. Earlier, there was a four-month period that ended in February when sale prices fell 1.9%. Compared to the end of the prior quarter, sale prices per unit for multifamily properties have risen 6% to $24,895. Similarly, for the preceding 12 months, sale prices have increased by 6.7%. The highest median sale price over the past three years, which was $42,122, was set in October 2009. The current median sale price is 40.9% lower. However, the current price is 9.5% higher than the three-year-low of $22,727, which was set in February 2012. Multifamily Property No. of Listings - Sale Trends This is the second month of an increase in multifamily properties for sale in the metro area, representing a 4.1% increase. The number of multifamily properties available in the Las Vegas Metro Area has risen 12.7% over the past year. Multifamily Property Days on Market - Sale Trends Multifamily properties in the Las Vegas Metro Area are staying on the market longer than they did during the same time last year, and the change is greater than that at the state level. They now last 91 days on the market at the metro level, an increase of 17.9% year-over-year. At the state level, these properties are on the market for 104 days, a decrease of 12.5% year-overyear. Compared with the highest time on market set in April 2010, these properties are now turning over 55.7% faster. The time that multifamily properties stay on the market in the metro area has been increasing every month for the past four months.

Access Investment Offerings COMMUNITY (UNITS)

ASKING PRICE

PER UNIT PRICE

BROKER / CONTACT INFORMATION

Coronado Bay Club (346)

$ 47,500,000

$ 137,283

Colliers International / 702.836.3717

Crescent Ridge (344)

$ 39,980,000

$ 116,221

Hendricks & Partners / 702.866.6239

Hacienda Heights (216)

$ 22,660,000

$ 104,907

Hendricks & Partners / 702.866.6239

Casa Sorrento (236)

$ 13,000,000

$ 55,085

LIHTC Advisors, LLC / 800.840.3021 x1

Pecos Terrace (184)

$ 12,769,327

$ 69,399

Colliers International / 702.836.3717

Access Recent Transactions COMMUNITY (UNITS)

CLOSING PRICE

PER UNIT PRICE

CLOSING DATE

BUYER

Adobe Villas (132)

Unpublished

Unpublished

Esplanade (163)

$ 18,312,500

$ 112,347

November 20, 2012 Wyse Technology Investments

Willows at Town Center (188)

$ 22,000,000

$ 117,021

November 16, 2012 RK Properties

Rainwalk (105)

$ 2,900,000

$ 27,619

November 15, 2012 T & T Corporate

Terracina (144)

$ 5,825,000

$ 40,451

November 15, 2012 Strata Equity

December 13, 2012 Costas Fergadis

For additional information and / or broker information on Access Investment Offerings and / or Access Recent Transactions contact Bret Holmes at 702.699.9261.

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Y O U R A C C E S S T O T H E L A S V E G A S M U LT I - F A M I LY H O U S I N G M A R K E T

Don’t Take Our Word, Ask Our Clients

management companies can’t ... Don’t you want your asset to be Advanced? Get the most Advanced leadership in the industry today, contact Advanced Management Group directly at 702.699.9261. In a market that changes daily, sometimes hourly, your asset can’t afford anything less than being Advanced.

Nobody can give you a better picture of your property management company’s service than a current client. Do yourself a favor in 2013, ask your property management company to give you the names of three clients with similar properties. Get in contact with those people and ask them questions that you feel are important to the success of your property. No one can give you valuable insight like them and they can usually give you a good picture of the strengths and weaknesses and their contentment with the service. Ask yourself, is your current property management company up to completing this simple task for you? If not, they may not be the right property management company for you. They may be hiding something or they might not have a solid relationship with their own clientele. Either way, it is a red flag for you and your property. We know we are right for any asset. We are not only Advanced in our thinking, we are Advancing our clients thinking to levels never before seen in Las Vegas. Just ask them. We care about our assets and so do our owners. Why? Because we think like owners and give you the attention most property

For information, article consideration and featured columns ACCESSLASVEGAS can be contacted at 702.699.9261. The publisher of this newsletter is:

ACCESSLASVEGAS 2775 South Rainbow Boulevard, Suite #101-C Las Vegas, Nevada 89146 702.699.9261

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