June-July-2010

ACCESS LASVEGAS JUNE | JULY 2010

YOUR ACCESS TO THE LAS VEGAS MULTI-FAMILY HOUSING MARKET

Silver Lining In A Dark Cloud: The Future of Apartments Is Bright “While the single-family home market has fallen dramatically and may not have reached bottom, the lasting impact of today’s recession and a major decline of detached housing could reshape residential patterns in the U.S. for years to come,” writes Chris Lee (CEL & Associates, Inc.) in his company’s white paper “The Future of Apartment Living”.

Emerging patterns and trends clearly point to a new era of apartment living as an economic necessity as well as a preferred lifestyle for millions of Americans. “While the current economic crisis is likely to prevail through 2010 or longer, a substantial increase in homeownership rates probably will not occur for at least 10 to 15 years as stringent regulatory oversight regarding lending practices is deployed, household net worth and income increase measurably, and federal stimulus capital is mainly directed to ‘bailout,’ ‘rescue’ or ‘short-term stimulus’ plans. Overall homeownership could decline from today’s high levels to below 60% or considerably less. While this economic transformation will be

painful for many Americans, it will be good news for the apartment industry,” predicts Lee. CEL & Associates conducted an extensive study of the factors that shape and reshape residential housing patterns in the United States and identified ten major trends that underlie “likely incredible opportunities” in the future of rental housing. These trends account for major forces that will determine the future housing characteristics, including economic, demographic, political, geographic and financial. “One fact is clear ... demand for apartment living during the next two decades should increase dramatically, and the new renter lifestyle soon will be on par with single-family home ownership,” states Lee. These trends “highlight why the outlook for the apartment industry is very bright,” argues Lee, explaining how each trend is influencing the core of the multi-housing market.

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ACCESSLASVEGAS June | July 2010

The Future of Apartment Living Ten Major Trends That Underlie “Likely Incredible Opportunities” In The Future of Rental Housing Source: Chris Lee, CEL & Associates, Inc.

Continuing from our cover story, here are the ten major trends:

will rent. In 2008, generation Y members were aged 12 to 31.

Trend 1 - Population Growth Creates Housing Demand

In 2010, the prime renter group, those in the 18 to 44 age range, will have 107 million people, with the majority being Generation Y’ers. By 2020 and 2030, this group will grow to 112 million and 118 million respectively. “If the current percentage of 18 to 44 year olds (46%) who rent remains fairly constant, the number of new renters could increase by 5.1 million (2010 - 2030),” writes Lee. “If the percentage of 18 to 44 year olds increases due to an inability, unwillingness and / or lack of desire to own a single-family home, potential renters could jump from 49.2 million in 2010 to as many as 63.7 million by 2030 ... an increase of 14.5 million.”

As the U.S. population grows, the need for housing also increases. Between 1990 and 2008 the number of housing units in the country increased from 102.3 million to 130.4 million, points out Lee. This huge 27.5% jump will be followed by continued demand for additional housing. Between 2000 and 2030 the U.S. population is expected to add 72.3 million residents, which will require 29.6 million additional housing units.

Moreover, Lee expects homeownership to decline because of the recent subprime mortgage crisis and plummeting values of homes across the United States. This spells good long-term news for the apartment industry, because each percentage point drop in homeownership creates a need for a million more rental housing units. “Obviously the number of apartments probably will be less due to the available inventory of rental single family homes for a period of time,” he speculates.

In addition to population growth that creates more housing demand, the replacement of aging, outdated apartment units also will contribute to shaping the future multi-housing market.

According to CEL & Associates, based on a conservative cost-to-build value of about $125,000 per unit, nearly $1.1 trillion (8,628,000 x $125,000) in new apartments will be needed between now and 2030. These figures, warns Lee, “do not assume any reduction in home ownership, new federal / state housing or affordable housing initiatives, or other significant changes to existing governmental housing policies and lending practices, which could increase or decrease the total number of apartments needed over the 2008 - 2030 period.” This estimate also does not account for the possible impact of higher property, sales or income taxes, growing energy costs, reduction in household income or changes to federal or state tax policies. Nevertheless, the trend for growing apartment demand is absolutely clear and unmistakable.

Trend 2 - Generation Y Will Become the Next Wave of Renters Generation Y comprises nearly 85 million U.S. citizens born between 1977 and 1996. These people represent a population group that is larger than today’s baby boomers (76.9 million). As a rule, the younger the individual is the more likely he or she 2

Understanding Generation Y’s preferences and desires will be key to effectively developing and marketing apartment communities. Generation Y prefers urban living to a suburban lifestyle. It wants to be in a city 24/7, craves for college-like quarters and does not have enough money to buy a home.

Lee refers to a 2008 study by the Aspen Institute that analyzed MBA students’ intention and desire to work for companies that offer the potential to make a “contribution to society.” The study revealed that Generation Y is ambitious and believes in its own potential to accomplish almost anything. At the same time, these are the people who are rather close to their parents and are likely to involve them in many important decisions including housing and employment.

Another distinctive feature of Generation Y is its active use of social media networks such as YouTube, Facebook, Twitter, Craigslist and MySpace. “They will expect their residential landlords to do the same,” writes Lee. “Tolerant of diversity, this group will ‘want’ to revitalize the urban core, live within proximity of a college or university for ‘continuing education,’ and will

‘return home’ if they can’t find a job or living accommodations that suit their ‘unique’ needs.

Currently 57% of those under age 34 rent, and of those under age 45, 46% rent.”

Moreover, Generation Y is likely to continue to delay or forgo marriage and start families later than their parents.

This will affect the average apartment household size that will remain at roughly 1.9 - 2.3 for many years to come.

Lee cites a 1946 Gallup poll that reported on the ideal age for getting married. It was 21 for women and 25 for men. By 2006 the public perception of the ideal marrying age changed to 27 for men and 25 for women.

Generation Y is likely to put personal and professional development higher on its priority list. “Delays in marriage and having children are likely to keep the demand for rental properties high and increase demand from 46% to perhaps as high as 50% or 54%,” points out Lee. “In addition, rising birthrates for unmarried women could result in fewer single-family households. In 2007, for example, 1.7 million babies born in the U.S. were to unmarried women, and teen mothers accounted for 23% of total births.”

CEL & Associates forecasts that as many as 25.9 million apartment units or more will be occupied predominantly by Generation Y residents in 2030.

Trend 3 - The Appeal of Homeownership Is Declining Dramatic evidence of declining

homeownership has been well documented by the U.S. Census Bureau: In 2007, the number of single-family home starts equaled 1,046,000; twelve months later, this number had plummeted 40% to 622,000. “This level of single-family starts is one of the lowest since the U.S. Census Bureau has collected such data,” comments Lee. The recession of 2007–2009 has stopped the home-buying frenzy. The sales of new and existing single-family homes have dropped dramatically, driving their inventory to an all-time high in 2008.

According to CEL & Associates, the home building industry is unlikely to rebound for several more years and will shrink significantly. “It is very unlikely that annual, new home starts will reach the 800,000 level for many years,” writes Lee. “The annual number of new home starts into 2020 could very possibly remain around pre-2000 levels ... assuming no change in lending practices, and / or governmental policies meant to encourage or discourage homeownership.”

Most importantly for the apartment industry, the appeal of homeownership in American society may be changing.

Lee refers to the tremendous wealth lost in home values since the peak of homeownership in 2006 and to very low annual returns that homeownership appears to produce in the long run.

Besides, in many cases, it is still cheaper to rent an apartment than own a home.

According to Green Street Advisors, during the past 18 years, after-tax mortgage payments have averaged 26% more than rent payments, with a peak of 66% in the middle of the housing bubble in 2006. “While mortgage payments could drop as short-term government bailouts and rent concessions take hold, the long-term outlook for homeownership appears to be waning,” states Lee. Lee expects apartment appeal to grow based on the development of new projects for sale and rent in “walkable urban areas.” Having the ability to reduce commuting times may also result in converting suburban homeowners to urban renters.

Additionally, “a global economy and diversification in culture also is diluting the traditional U.S. ‘American Dream’ of homeownership,” says Lee, “as we have seen greater evidence of the ‘European model’ of density and lifestyle, where

homeownership is low in countries such as France (55%), Germany (42%) and Switzerland (35%). It is more than a remote possibility that the U.S. homeownership rate could drop to 57% or lower during the next decade.”

Recent statistics show that today only 12 to 14% of renters leave apartments to buy a home. There are no signs that this number will grow any time soon. On the contrary, it is expected to decline further in the short term. One part of the homeownership appeal is the tax benefits from mortgage interest and property-tax deductions afforded to homeowners.

However, as findings of the Urban Institute Brookings Tax Policy Center indicate, almost 80% of these benefits only go to the top 20% of taxpayers in terms of income. Instead, homeowners need to spend a huge chunk of their incomes to maintain and repair their homes. Lee says major home repairs and maintenance usually cost 2 to 4% of the home purchase price per year. Plus, financing fees and sales commissions can amount to 7 to 10% of the cost of buying a home. “Renting is now becoming an economic as well as a lifestyle choice,” states Lee. Forecasts of further declines in home values and an increase in the number of homeowners who have mortgages higher than the value of their homes will only exacerbate the drawbacks of homeownership. “In the 2009 to 2015 period many homeowners will become, in essence, ‘renters’ as home prices remain low by historical standards and there is little or no equity in the home,” relates Lee. More stringent requirements for obtaining a loan, having an adequate down payment and being able to prove the ability to pay monthly mortgage

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ACCESSLASVEGAS June | July 2010

obligations are not likely to broaden the pool of potential homeowners and make homeownership as appealing as it was before the current crisis.

households. Thus the outlook for apartment demand is expected to increase dramatically in the Sun Belt states.”

Trend 4 - Multifamily Starts Likely to Rebound as Condo Converters Exit

Trend 5 - Hispanic Population Growth and its Tendency to Rent

Since the mid-1990s, the apartment industry has averaged slightly less than 300,000 starts and 275,000 completions per year, according to CEL & Associates.

In the recent past, the strong single-family home market kept multi-housing development far below 1980s levels. The prospering condo and condo-converter marketplace also contributed to this trend. Times have changed. Not as many apartment developers and owners eager to try their luck in the condo market today as there were in 2005 when the number of apartment properties sold for condo conversion was at an all-time high. With the crisis ravaging the home building industry, many condo developers and condo converters have exited the marketplace. This was good news for the apartment industry that will ultimately help it to rebound.

Between 2010 and 2013, apartment rents should rise significantly as the lack of new development projects started during 2007 - 2009 create a supply / demand imbalance. This imbalance could continue into 2014 - 2015 until normal levels of apartment starts return.

Although the likely rise in multifamily starts could be restrained by the increasing difficulty to find and entitle land where housing demand is the strongest, the decline in single-family home starts will only facilitate this process.

Rebounding multifamily starts should help return America to the mobile society it once was. With people reluctant to sell their homes and being stuck in one place, “the population growth within the geographic areas of the U.S. which traditionally have attracted retirees, job seekers, and lifestyle-seeking citizens has slowed,” argues Lee. “There are now fewer areas of the country that look attractive to those seeking jobs. While the Sun Belt states are still attracting more population, the beneficiary of this reduced migration flow are likely to be apartment owners. Those residents who tend to relocate or are more mobile are generally those age 18 to 44 years ... who are starting their careers and / or 4

According to CEL & Associates, Hispanics will account for 54% of the U.S. population growth between 2020 and 2030. Their numbers will increase from 66.4 million in 2020 to more than 83 million in 2030. The apartment market will be a beneficiary of this mushrooming immigrant group. The primary need of Hispanics arriving to the U.S. will be affordable housing in urban centers and adjacent suburbs where they are more likely to find work.

“Serving the housing needs of this burgeoning population will likely be a focus of future governmental policy and new residential development activity,” points out Lee. The apartment industry will be expected to meet rental-housing demand for 12.9 million units, based on CEL & Associates’ estimate of Hispanic population in 2030 of 83.7 million, 54% of whom will be renters with a 3.5 average household size. For comparison, in 2000 there were 6.5 million Hispanic households living in rental housing. By 2030, the number of Hispanic renters could be even higher than 12.9 million if the current recession is slow to recover.

Trend 6 - Aging Population Affects Housing Patterns As the likelihood of renting increases as Americans age, the apartment industry should also be prepared to provide housing for 54.8 million U.S. residents age 65 and older by 2020, 72.1 million by 2030 and 86.7 million by 2050.

American seniors are expected to live longer. The oldest population group (age 85 and older) alone will double from 4.7 million in 2003 to 9.6 million in 2030 and double again to 20.9 million by 2050, reports CEL & Associates.

Currently, about 33% of the oldest U.S. citizens are renters as opposed to only 18% of those age 60 - 64 years. Growing life expectancy and improving and more accessible health and wellness services will result in creating new and additional demands for senior housing.

“It would not be surprising if aging Baby Boomers lacking sufficient funds to fully retire downsize to apartments,” stresses Lee. “The combination of rising taxes, home maintenance and repair costs, insurance and distance from major retail and healthcare facilities could cause a growing number of retirees to become renters. Many of these retirees may sell their single-family homes and, if the mortgage has been paid off, provide financing for the buyer. This source of income plus Social Security and / or other retirement monies may enable many to seek a smaller, more urban lifestyle choice, with sufficient income to enjoy their respective ‘retirement years.’”

Trend 7 - Urban Job Growth Spurs Rental Demand Urban areas account for more than 80% of U.S. jobs and most of them are found in the top 50 metropolitan statistical areas. In places that boast plenty of jobs, prices for single-family homes tend to be higher than the national average of more than $181,000. The majority of young workers will be unable to own a home and turn to rental housing. Many of them will remain renters for much of their lifetime, points out Lee. “This demand for affordable and workforce housing will generate a wave of redevelopment, mixed-use and transit-proximate rental housing options in walkable communities. Work-life balance is important to Generation Y, and most appear to want more personal time, so are willing to forgo long commutes to recapture that time, albeit with higher density,” relates Lee. Lee expects rent-to-own high-density housing options to become increasingly popular among 41% of American men and 49% of American women who want to own their own homes, but cannot afford them initially.

Trend 8: Affordability Remains an Issue The subprime mortgage crisis and the subsequent collapse of many single-family home loan lenders are creating a boon for the apartment industry. According to the U.S. Census Bureau, college graduates earn on average $57,500 per year. This is not enough to purchase a home. Most Americans need a loan to become homeowners. Meanwhile, “with memories fresh on the $500+ billion recent and potential subprime loan losses,” lenders will continue their current stringent lending practices at least for the next decade. Only the most qualified loan applicants will have an option of buying a home. The rest will have no other option than to rent.

The recent takeover of Freddie Mac and Fannie Mae by the Federal Housing Finance Agency is expected to raise the bar of fiscal responsibility at these organizations, reducing national mortgage originations in the near term.

Additionally, CEL & Associates refers to recent trends indicating that added fees based on credit scores also will increase the cost of financing a home purchase.

Housing affordability will remain an issue for many Americans because their net worth is not likely to increase as quickly as it did in the recent past. With the average household debt nearly doubled and several trillion dollars in household net worth lost with the collapse of the stock and housing markets, people’s financial worth took a big hit.

Moreover, excessive borrowing and deficit spending by the Obama administration in all likelihood will result in increased taxes. Someone has to pay for Obama’s spending spree. When taxes are increased, purchasing power declines.

“Many Americans have debt obligations far more than their capacity to pay, and

higher taxes will only result in a declining ability of Americans to own homes,” explains Lee. Trend 9: States and Localities Take Action The federal government is expected to invest hundreds of millions of dollars in infrastructure, urban renewal, sustainable technologies and affordable housing programs.

A 2007 study by Harvard University’s Joint Center for Housing Studies showed that 37 states and more than 350 counties and cities used public revenue to create housing trust funds that collectively spend almost $1 billion annually on the production and preservation of affordable housing. An increasing number of localities across the country are taking steps to mandate the production of affordable housing through inclusionary zoning ordinances.

CEL & Associates predicts that the federal government will “increase the minimum wage standard and Earned Income Tax Credit while mandating states, counties and cities to prepare regional housing strategies that encourage production of affordable rental housing options and support non-profit regional housing corporations.” Programs such as HOPE VI, the Low-Income Housing Tax Credit, Community Development Block Grants and the HOME Investment Partnership Program are most likely recipients of more attention and funding from government.

Trend 10: Investors Like Apartments Investors recognize the importance of the apartment industry in providing rental housing. The industry has attracted institutional and private capital, bringing solid rates of return. Since 1996, financial returns within the apartment Equity REIT sector have outperformed the S&P 500 and NASDAQ , says Lee. In the next 20 years, investor’s interest in apartment properties will continue to rise. Growing demand, people’s desire to live in vibrant urban areas, employers striving to have access to an educated work pool and public / private partnerships to revitalize urban and suburban locations will contribute to this trend.

“From those investors who want to acquire and / or (re)develop an existing five- or ten-unit or more apartment buildings,” writes Lee, “to those entities which want to acquire or redevelop a 150-, 200-, 300-unit or more Class A or B apartment property, the ownership of apartment buildings will continue to attract capital. Apartments have consistently shown resiliency during periods of economic downturn and / or recession. The fact that apartments have shorter lease terms makes them attractive to investors who want greater flexibility.”

CEL & Associates expects that attractive loan terms offered by Fannie Mae and Freddie Mac should continue, although at a reduced level and with slightly different terms. “It is very likely that a national rating system will be put in place to reward the ‘good’ borrowers and create disincentives for the ‘inferior’ borrowers,” notes Lee. Apartment Industry Threats While all ten major apartment industry trends point to a very positive outlook for its future, there are several potential threats that might produce a negative effect. According to CEL & Associates, these threats include: • National rent control for apartment owners who have loans from Freddie Mac, Fannie Mae or any lender receiving government assistance; • Restrictive policies or mandates from local, state or federal agencies that drive construction or operating costs higher than what the renter is willing or able to pay; • Overzealous “greening” or “immigration enforcement” laws that require owners and managers to become regulators and enforcers of government regulations.

While these are reasonable concerns, Lee believes that an active involvement by all those who work in, serve, and lead the apartment industry can assure an “incredible” future with a shift to a much higher number of apartment dwellers for financial, lifestyle, age, health and other reasons. “What is needed is governmental and regulatory recognition that rental housing must be a priority to bring the workforce closer to available jobs and provide a shelter option for those with reduced financial means, serve as a catalyst for urban renewal and accommodate a future tsunami of potential renters.”

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ACCESSLASVEGAS June | July 2010

Rebound Is A Welcomed Relief for Apartment Owners Tough Choices Still To Be Made For Balance of 2010 Source: Excerpted from “Apartment Owners Have Choices to Make In 2010” as Published in GlobeSt.com

For those active in multifamily investment, the current rebound is a welcome relief after suffering through 2009 -- or, as CB Richard Ellis puts it, the worst year on record for investment sales. Last year saw deal volume, in terms of both the number of properties traded and price, plummet, bringing asset value down with it. Investors on the whole were hesitant to do business without knowing the direction of the market and the global economy in general.

Yet toward the end of the year and into 2010, transaction activity began to pick up. Driven by the availability of GSE financing, low interest rates and relatively good fundamentals in most major markets, coupled with the need to place capital, buyers began to come into the market to snap up select properties.

The only problem, at least in the final three months of last year, was that sellers were reluctant to give up their assets. Yet this actually turned out to be a positive for the sector as fierce competition for the few quality properties that were put on the block worked to drive prices up.

CBRE notes that it seemed like values bottomed out in November 2009, when Moody’s reported the first positive returns; Moody’s originally estimated that multifamily prices would decline between 25% and 40% from the 2007 peak. By the end of last year, cap rates for class A assets in top-tier markets even saw a bit of a decrease.

will be real rent increases in 2011 and significant rent increases in subsequent years," says Peter Donovan, senior managing director of CBRE’s multi-housing group here. "Cap rates for core multifamily properties have declined 75 to 150 basis points at a speed that would have been unthinkable a year ago."

The wealth of capital versus a dearth of supply will most likely exist for the balance of the year, he adds, and cap rates should continue to decrease modestly through the first half of this year. Once more product enters the market, cap rates should start to rise, probably in the latter half.

INVESTORINSIGHT

The lack of available properties is causing some would-be buyers to consider lesser-quality properties.

"Investors will be able to seek better returns and less competition for class B product through the first part of 2010," says Donovan, leading to downward pressure on cap rates for those properties, too.

Yet class C product isn’t garnering the same attention, mainly because tighter underwriting conditions make them difficult to finance and investors don’t see the upside potential in them. "The volume of class C transactions will likely remain small as investors looking for such opportunities are penciling in IRRs of more than 20%," he states.

While that did entice some sellers to put their assets up for sale, most are still holding tight to their properties, resulting in a significant imbalance between the demand for, and supply of, class A assets.

"Private, public, domestic and foreign capital alike have all identified US apartment properties as the best and No matter the quality of property, the safest bet for the foreseeable future. leading criterion for investors seeking Property operations in most markets are stabilizing with a general belief that there apartment product will be a predictable 6

income stream. Both buyers and lenders "will use annualized 30-, 60- or 90-day trailing revenue with 12 months of trailing expenses to create a stable, predictable NOI," in their underwriting, says the executive. This trend has even led investors to shy away from value-add plays, since lenders are less willing to finance product that is not currently cash flowing. While NOI for the first year is underwritten close to existing figures, many players are expecting somewhat significant rent growth from 2012 to 2014 in most major markets.

Aside from core product, a good amount of investors are looking at "unstable" product such as fractured condos or new deliveries that aren’t fully leased. Even traditionally core buyers are considering some of the assets, as long as the location and price are right. The good news for folks looking for deals is that 2010 should increase the flow of distressed assets to the market, although it will be nowhere near the flood that was expected. "The five-year, ultra-aggressive CMBS loans that were placed during the bubble period in 2005 through 2007 will begin to come due this year," Donovan explains. That works out to some $29 billion of fixed-rate CMBS maturities this year, a five-fold increase over 2009.

While borrowers holding class A and B product will be able to get workouts, class C properties will most likely end up on the market as distressed offerings.

Along that vein, many owners will have to make a decision to either refinance their asset until values increase more, or sell it into today’s market. There are several factors to consider, including the direction of the economy, whether interest rates will remain low or rise, property fundamentals and competition from other assets that are put up for sale.

If interest rates rise, so will cap rates, resulting in value declines.

It certainly is a sellers’ market, but some property owners will still choose to hold onto their assets in the hopes that fundamentals will improve and the investment market will be more favorable in a few years. In these cases, it would be wise to refinance through Fannie Mae or Freddie Mac, especially if the owner intends to sell within five years.

Donovan concludes, "Having assumable and resizable financing on the property will hedge the possibility of rising cap rates and declining property values." © 2010 Incisive Media US Properties, LLC. All rights reserved.

Implementing Creative Ideas at Your Community Source: Anuradha Kher, MHN Online

PROPERTYTIPS

The area next to the swimming pool is mainly where Resource Residential screens the movies and sporting events.

But on occasion -- in case of Sunday morning cartoon shows for example -the screens will be set up indoors.

Krichman purchased Open Air Cinema’s CineBox systems for each of the Resource Residential properties last year.

The system includes a giant 12’ by 7’ screen, which inflates in seconds, along with a digital projector, speakers, mixer and DVD player.

Legacy at Willow Bend is a senior housing community spread across 28 acres in Plano, Texas, decided to make the whole community pet-friendly. It has A tough economy is a great time for the one dog park that is ready and functional birth of new ideas. In one of the most and another one under construction. competitive real estate markets in Michael Ellentuck, president of The decades, property managers have been Legacy Senior Communities and a dog compelled to come up with new ways to lover, understood that active seniors attract residents and retain existing ones, looking to make a transition to life-care and also provide them with new avenues communities, who are also pet owners, of entertainment and interaction. often face a dilemma. “They can’t simply Creating a sense of community has leave their pets behind. I know how become one of the most important things important it is, having been a dog owner a property manager can do. myself,” says Ellentuck.

Resource Residential, which owns and manages 52 properties, from Portland, Maine to Los Angeles, installed inflatable movie screens at poolside areas at all its properties. “Everyone was beginning to cut back on their frivolous spending -going out for movies etc. so I was looking for a way to provide something different to our residents and also try to build a better sense of community that includes the whole family,” Harlan Krichman, president Resource Residential, tells MHN. The salt-water swimming pools at Resource Residential’s properties provided an excellent location for the inflatable screens. “If we could find an outdoor movie system, we could turn our swimming pools into dive-in theaters!

And, quite frankly, no one else was doing this,” says Krichman. He says the inflatable screens also provided a great way to utilize the pools. “It shows off our pools and brings people together.

Building a sense of community is important to us because if our residents are happy in their community, they will make friends and start to build bonds.”

The movies are family friendly so the whole family can come out for the event.

“They bring their rafts and sit in their tubes while watching the movie,” he adds.

Even though the campus is large, it wasn’t a practical idea to let dogs run all over it. They could get lost and their owners could certainly not chase after them. So a dog park was a great idea. In addition, the community also has themed events for dogs -- a yappy hour -- when residents bring their dogs to the community bar, Gatsby (named after Ellentuck’s dog who passed away recently.) Dogs are allowed in common areas of this community around the year and the concierge desk always has a bag of treats for the dogs. “They really are a part of the community. We’ve embraced the idea of pets being a part of our community. We’ve invested real dollars to make their lifestyle a good one,” says Ellentuck. He is now building an enclosed structure on the dog park to be outside but avoid extreme heat or cold.

Lincoln Property Co.’s new project, The Goodwynn at Town: Brookhaven opened last year in the Atlanta metro area with the aim to give residents a resort-like feeling. The community holds several resident events such as the weekly continental breakfast.

“In addition, once a month, we have a chef come in and create a special breakfast for the staff,” Mary CookDetweiler, property manager at the Goodwynn, tells MHN. “Residents are lined up every Saturday to get their breakfast! Our chef also does a cooking class for the residents once a month.

Each class has a certain theme.”

Residents also get access to a free personal training session in the gym. “We offer this service free of charge to the residents. We have the trainers for several hours a couple of days per week.

Residents can book appointments and have one-on-one training work outs. “We have many amenity areas at this property and we use them to hold various interactive events for the residents,” she says. “The idea behind all these efforts is to make residents feel like they are at a resort which also has the feel of a community.”

The community has purchased Bocce Ball equipment and a tennis “lobster” (a machine that shoots tennis balls so you can practice solo) with rackets. Residents can check these out and use it on the Sky Garden.

CookDetweiler says, “It’s amazing to see how many people come for these events.

I was blown away with how everyone was getting along, getting to know each other -- that feeling of community.” She says the property is getting great word of mouth publicity because of all these events.

As for new ideas they are looking at in the future, CookDetweiler says, “There is nothing that we won’t look at. Of course, some are more cost prohibitive than others but we weigh all our options. We always throw any ideas out there and see if they work.”

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ACCESSLASVEGAS June | July 2010

OCCUPANCYCORNER

Las Vegas Metro Occupancy Trends May 2009 through April 2010 91% 90% 89.55%

89%

89.48% 88.94%

89.30%

89.17% 88.81%

88.60%

88%

89.59%

89.84%

89.63%

88.92%

88.72%

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87%

OVERVIEW: This is the fifth consecutive month that vacancies have declined in our survey since November 2009, when the overall vacancy was 11.28%. However, there is still significant stress in the market due to over leverage, vacancies, concessions and single-family rental homes.

Source: Spencer Ballif and Jeff Swinger of CB Richard Ellis (Las Vegas) (111,283 Apartments Surveyed in April)

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MARKETACCESS

Las Vegas Snap Shot

Source: The Bentley Group Real Estate Advisors

HAVE WE TURNED THE CORNER? There is no doubt that the first few months of 2010 have shown improvement in the multifamily industry - at least in some markets. Many are asking if we have now reached the bottom of this cycle and, if so, where we are heading in the short term. We are all aware that this national recovery is so far shaping up to be one without much job improvement. Even the U.S. Department of Labor is having a tough time figuring out this mess. Just last month, they released revised numbers which reflected that the nation lost 250,000 more jobs in 2009 than was previously reported. Reviewing individual metropolitan numbers for November 2009 through February 2010 confirm that it is very hard to reconcile reality with reported figures. And, there is very little evidence that job growth has yet returned, so downward pressures continue to plague our industry. Nonetheless, many apartment markets are showing obvious signs of stabilizing while some are actually improving.

Las Vegas, Nevada has had virtually no change in the Occupancy Rate over the past year. However, they have had a terrible stretch of panic-driven declines in rents, which are off as much as 11%. That panic pricing stabilized in February and March of this year which places it into the “Stabilized� category, at least for the time being. That said, the major problems facing Vegas will not be overcome anytime soon and we expect this market to have a very difficult time sustaining these numbers. Las Vegas has seen some improvement lately in the Occupancy Rate, but at the expense of Effective Rents. In fact, Vegas has now reported 21 straight months of declining Effective Rents.

One major contributor hurting a comeback for Vegas is unemployment. The nation's party animal continues to be left out of a hiring bash. Thirty-four states celebrated lower jobless rates in April, as improved economic conditions spurred hiring. As for Nevada? The Silver State was one of the unlucky ones, posting jobless gains that pushed its unemployment to record numbers. Nevada's unemployment rate rose from 13.4 percent in March to 13.7 percent in April.

Unemployment in Las Vegas surged past 14 percent for the first time, going from 13.8 percent to 14.2 percent month over month. This does not bode well for the multi-housing industry in Las Vegas as owners and property management companies continue to report a high number of skips and evictions due to job loss.

Access Investment Offerings COMMUNITY (UNITS)

ASKING PRICE

PER UNIT PRICE

BROKER / CONTACT INFORMATION

Emerald Suites Las Vegas Portfolio (483)

$ 34,700,000

$ 71,483

Grubb & Ellis / 702.733.7500

Winsome West Apartments (228)

$ 20,800,000

$ 91,228

Elite Realty / 702.743.8991

Sun Gardens (300)

$ 7,450,000

$ 24,833

Hendricks & Partners / 702.866.6239

Charlestonwood (85)

$ 5,750,000

$ 24,784

Hendricks & Partners / 702.866.6239

Bonanza Apartments (36)

$ 1,700,000

$ 47,222

H & L Realty / 702.385.5611

Fairfield Apartments (22)

$ 1,140,000

$ 51,818

CB Richard Ellis / 702.369.4848

Access Recent Transactions COMMUNITY (UNITS)

CLOSING PRICE PER UNIT PRICE

CLOSING DATE

BUYER

Newport Cove East (240)

Undisclosed

Undisclosed

April 12, 2010

Bank of America REO

Flamingo Chateau (136)

Undisclosed

Undisclosed

April 8, 2010

MidFirst Bank REO

Regency Place (137)

Undisclosed

Undisclosed

March 23, 2010

Bank of America REO

Casa Salvatori III (50)

$ 1,450,000

$ 29,000

March 23, 2010

David L. Steinberg

Dolce By The Lakes (184)

Undisclosed

Undisclosed

January 14, 2010

Tierra Ridge (98)

$ 6,015,000

$ 61,378

Citigroup REO

December 31, 2009 Petwin Capital Group

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

9

ACCESSLASVEGAS June | July 2010

Las Vegas Has More Than Its Share of Troubled Properties Source: Las Vegas Sun

Las Vegas continues its overall No. 1 ranking in troubled commercial assets despite clearing up some of its bad loan problems, according to New York-based Real Capital Analytics.

Las Vegas retains that ranking despite $4 billion in distressed properties moving off the list. Lenders have greatly stepped up the pace of workouts since the beginning of the year.

Las Vegas has 305 troubled assets valued at $15.6 billion, the largest percent of troubled properties in the country, the firm said.

None of that includes $2.1 billion in troubled loans that were resolved and $1.9 billion in loans that were restructured.

Of the $15.6 billion in distressed loans covering 305 properties, $7.8 billion involve 30 hotels in Las Vegas.

The others: • $4.1 billion involve 12 development sites.

• $1.4 billion for 60 apartment complexes.

• $1.2 billion for 65 retail sites.

• $741 million for 37 industrial properties.

• $533 million for 31 office properties.

• $116 million for other commercial properties.

Of the new round of troubled properties added to the list, office and industrial account for 37 percent of the entrants, up from 25 percent in 2009 and 18 percent in 2008. A much lower proportion of recent troubles involve land and construction loans, which accounted for 4 percent of new distressed properties, down from 25 percent in 2008, the firm reported.

Over the past 12 months, Las Vegas has had $246 million in property sales, which includes 27 of any consequence. There were 11 retail properties sold worth $108 10

million; six industrial properties worth $59 million, six office properties worth $41 million, three apartment complexes worth $28 million and one hotel worth $11 million.

Apartment Market Outlook

Area Housing Market The rate of price drops for Las Vegas area homes eased dramatically in the first quarter of 2010 compared with a year earlier and reflects how the market has stabilized over the past year, analysts said.

The occupancy and rental rates in the local apartment market picked up during the first quarter, but analysts said that shouldn’t be viewed as a trend, given the high unemployment rate.

San Diego-based MDA DataQuick released home price numbers for the 58 local ZIP codes that showed a 14.7 percent drop in the median prices between the first quarters of 2009 and 2010. That contrasts with a 31.5 percent Applied Analysis reported the occupancy drop between the fourth quarter of 2008 rate locally was 90.5 percent at the end of and fourth quarter of 2009. the first quarter, up from 90.1 percent at the end of 2009. The occupancy rate at The median price for resale homes and the end of the first quarter of 2009 was condos and new homes was $128,000 in 91.3 percent. the first quarter. Only 11 of the 58 ZIP codes for the region recorded a price The five-year occupancy rate in Las decline of 20 percent or more in the first Vegas is 93.5 percent. quarter compared to 46 ZIP codes that fell 20 percent or more in the fourth quarter.

The average rent requested by apartments at the end of the first quarter Surprisingly, Henderson, whose values was $777, $7 a month higher than the fourth quarter. That is still well below the have held better than other ZIP codes, had four with declines of 20 percent or $868 per month requested in the first more. They include 89011, down 35.7 quarter of 2010. percent; 89102, down 23 percent; 89074, down 20.5 percent; and 89015, down 20.1 percent.

LOCALEFFECTS

Jake Joyce, a project manager with Applied Analysis, said the depth of the recession in Southern Nevada remains a concern for the apartment market and that many complexes will require a loan modification or fall into foreclosure.

Rents and occupancies won’t return to where they were before the recession until after 2011, the firm reported.

The highest rent was requested in the southwest valley at $944 a month, while the northeast had the lowest at $655 per month. Other rents include the west, $765; central/east area, $714; northwest, $780; north, $796; south, $782; and southeast, $863.

The southeast had the highest occupancy rate at 92.4 percent, while the northeast had the lowest occupancy rate at 87.4 percent.

North Las Vegas, which has taken some of the biggest price hits, had one ZIP code, 89032, decline 20 percent.

North Las Vegas had the lowest median price of any ZIP code, 89030, where the median price of homes sold in the first quarter was $42,100, a 8 percent increase from the first quarter of 2009.

Besides 89030 in North Las Vegas, the other ZIP codes to record an increase compared to the first quarter of 2009 had some of the lowest priced homes.

There was 89169, up 8 percent; and 89115, up 3 percent. Those homes sold for $87,000 and $72,000, respectively.

Others that had increases were 89115, up 3 percent where properties sold for $72,000; 89107, up 5.3 percent, $70,000 median price; and 89101, up 13 percent, $52,000.

The lone ZIP code to record an increase where homes are priced higher was Boulder City. The median price of $245,000 was 4.3 percent higher than the first quarter of 2009.

Many Apartment Hunters Prefer Green Digs

GOINGGREEN

Source: Dees Stribling, MHN Online

According to a recent survey by Apartments.com, many people in the market for an apartment are now actively looking for green features in their dwellings. The company, an apartment search site, asked more than 1,400 of its web site visitors across the country whether or not green or sustainable considerations affect how and where they choose to live.

The survey found that 88 percent of respondents said the environment is an important issue, affecting way they live and even search for and select apartments. A roughly equal number, 89 percent of respondents, said they would prefer to live at a “green” apartment community, and more than 25 percent would pay more in rent to save money on energy costs.

Of course, green features aren’t the

Technology Trends in Multifamily Housing Source: The Colorado Springs Apartment Investor

Multifamily executives must constantly evaluate new technology hardware and software products at the same time they are integrating current tools, upgrading legacy systems and training staff to take advantage of underutilized components of programs they already have in place.

Things are changing quickly in this area and it can be a real challenge to keep up.

Let’s take a look at a few technologies that are not going anywhere soon:

TECHTALK

primary determinant in leasing decisions.

Preferences for green aside, nearly a quarter of the respondents, 24 percent, said they would rent an apartment that did not offer green amenities or programs, and 58 percent are on the fence about the question, with location, price and more traditional amenities still being the main factors in dwelling decisions.

Still, green can give apartment properties some competitive oomph. “Green apartment properties may have an edge in attracting future renters,” Tammy Kotula, a spokeswoman for Apartments.com, tells MHN. “From the response we received, it’s clear the environment impacts many of the respondents’ daily lives. These renters will likely choose an apartment property Mobile Phones - There are now more Americans with cell phones than either internet access or cable TV, and an estimated 70 million of us regularly use mobile web browsers. Google recently released Android, a software package for mobile devices, and on February 16, 2010 they announced 60,000 cell phones with Android are shipping every day.

Apple recently marked their 4 billionth app download, so as you can see, mobile devices are here to stay.

UDR, a Colorado-based REIT that owns 45,000 apartment units nationally, says that 9% of its web visitors in 2009 used phones for access, viewed over 400,000 pages and created 97 mobile leases. No doubt, these numbers will continue to grow.

that offers green amenities and programs over an apartment that does not.”

Green-conscious apartment dwellers reported the following behavior in their own lives, presumably whether they live in apartments or not: turning off lights, computers and appliances when not in use; running the dishwasher only with a full load; recycling paper, plastic and glass; using energy-efficient light bulbs; and purchasing “green” products.

During their apartment searches, they report looking for environmentally friendly amenities and features. Those might include energy-efficient windows and appliances; non-toxic paint; recycling programs; and automated processes for paying rent, renewing a lease and placing maintenance requests.

UDR was also the first to create an “augmented reality” app for multifamily.

A potential renter can point their phone’s camera at an apartment and see pricing and availability data superimposed over the live picture. UDR had over 125,000 downloads by the end of the year. Other firms have already created similar apps and more are sure to follow.

Web Portals - Another large and growing trend among apartment communities is the development of integrated websites that serve tenants and free up staff for other duties. Already, residents can pay rent online and submit work orders. Some properties even send out lease renewals with incentives for renewing early online. Freed from these mundane and time-consuming tasks, onsite personnel can spend more time showing apartments and performing other duties that increase resident satisfaction.

As you can see, technology is beginning to rapidly change the world of apartment management. iPad apps are already in development that will continue to accelerate this trend for the foreseeable future.

11

ACCESSLASVEGAS June | July 2010

Streamlined Approach Ensures Efficiency of Receiverships Advanced Management Group (AMG), a Las Vegas-based real estate and property management company, was appointed as the receiver for several local properties. AMG helps protect these properties values, on behalf of the court, while preparing them for a potential sale of the property.

“There are many multi-family properties being forced into bankruptcy or receivership within the Las Vegas Valley, and the bank or appointed receiver usually hires a third-party management company to manage those assets through the foreclosure or sale of the property,” according to Bret Holmes, president of Advanced Management Group and the Southern Nevada Multi-Housing Association.

Utilizing one company in both capacities is part of an innovative approach designed to reduce the amount of time and funds required to manage the asset through the foreclosure process or sale of the property. “We are seeing more foreclosures in the multi-family sector and the sooner those properties are brought up to speed, the better,” said Christopher A. Karsaz, Esq. of Karsaz and Associates, APC. “Using a more streamlined approach to receivership will aid in Las Vegas’ recovery to more financially sound market.

Contact Advanced Management Group directly at 702.699.9261 and get Advanced today. In today’s market, you can’t afford anything less.

For information, article consideration and featured columns ACCESSLASVEGAS can be contacted at 702.699.9261.

The publisher of this newsletter is The Internal Press.

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