Browse Category: Multifamily

Airbnb Owners Program: Letting The Landlord In

In an attempt to formalize and normalize the apartment subletting craze brought to the mainstream by home-sharing website Airbnb, the website this week launched a program for building owners.  In a move that will serve to differentiate the home-sharing leader from its many competitors, Airbnb is now soliciting landlords directly through its new owners program to create a building status declaring the property “Airbnb friendly”.

The program lets property owners decide the rules of sharing and codify these into a set of rules tenants have to follow, as well as making sure that a portion of revenue generated by Airbnb sharing is kept by the landlord.

After a pilot of the program in April proved a success, the company moved ahead with purpose. From Kia Kokalitcheva’s piece in Fortune “Inside Airbnb’s Plan To Partner With The Real Estate Industry”:

For Airbnb, finding a way to involve building owners and landlord is critical. While the company regularly touts stories from hosts whose extra income from renting out their homes has allowed them to afford their rent or a much deserved vacation, it’s no secret that landlords have not been the biggest fans of the practice. According to Airbnb, this animosity largely stems from their lack of control over the activity as tenants are ones usually listing and renting out the homes. Airbnb’s solution: Involving them in the process and giving them control along with a financial gain.

The company began piloting this program in April, and to date, somewhere between 1,100 and 1,500 units are either participating or scheduled to soon join, according to Airbnb. The company declined to reveal much details about the building owners it’s been working with, though it did say they’re in U.S. cities including San Jose, Calif., Philadelphia, and Nashville, Tenn., among others. They also widely vary in size and type, from small “mom and pop”-owned properties, to large companies that manage 50,000 units.

The Plan Design Includes Design

A major evolution of Airbnb that figures in its Friendly Buildings program has been the company’s Samara division, concerned with design of communal housing  with the specific intent of community revitalization.

As the technology ecosystem and Airbnb continues to force itself on the operational realities of commercial property, the company continually seeks ways to differentiate itself from a basic business model that, like so many others in the so-called “sharing economy” is utterly dependent upon other people’s stuff — in this case, on the inventory of landlords and property managers that appears nowhere on the company’s balance sheets. Samara’s attempt to become involved in property design boils down mainly to advocating space-sharing features such as smart locks and moveable walls. It’s high concept, unlikely to apply to the vast majority of their business, which is conducted in existing apartments. But it’s also absolutely critical to a business worried about prospering in a future where its competitors seem so numerous and easily spawned.

Recipes For Two $10K Multifamily Amenity Projects

Apartment Building with 4 Entrances USA

Adding value to multifamily property without adding staggering cost is a real trick. Investing in the right amenity upgrades can make the difference between struggling to rent out vs. setting up a waiting list for a very in-demand apartment development.

Brokers and property managers are constantly taking the pulse of the renting public, working their relationships with tenants into a deep understanding of what amenities are in demand and what’s ho-hum for the market. They’ve got the human intelligence that needs to be put together with the numbers that add up to an amenity paroject that makes all the difference. When market knowledge meets smart investing, the value-add is underway.

Low Tech Can Mean High Profit

Catching my eye this morning is this month’s post from Tom Brophy and Royce Monroe of ABI Multifamily, Having noticed that high-tech, millennial-pleasing amenities such as Wi-Fi come at a high cost, the writers aim instead at lower-tech projects that bring substance and lifestyle together — as well as the odd shipping container.

Setting out terms of the projects first, the idea is to use $10,000 to best effect in creating multifamily amenities.  The two projects: onsite storage units in a shipping container and a dog park.

The Container 

Enter the highly-stylized, adaptive re-use, multi-purpose shipping container! You’ve probably read that developers have repurposed shipping containers into housing, but what about storage? It’s portable, therefore no building permits, it’s structurally sound and better yet, you can store it on-site. There are quite a few companies out there which will pre-fabricate and drop-ship your storage facility to your location although it can be pricey.

For those a bit more enterprising and want to customize the storage units, below you will find a line-item breakdown to create five (5) separate storage units out of one shipping container. Prices include labor:

Costs
20’ Container + Drop Ship: $3,000
(5) Roll-up Doors: $3,000
Internal Dividers/Solar Electric w Backup: $1,000
Paint (local artist to add value): $2,000
Contingency: $1,000
TOTAL: $10,000

Rent
Gross Potential Rent per Unit: $65/unit (similarly sized off-site storage units rent for $56/unit/month)
Gross Potential Rent per Month: $325
Gross Potential Rent per Year: $3,900

Return on Investment (ROI)
Number of Years: 2.25 years
Value Increase (based on 6% CAP): $65,000

The Dog Park

Now that the creative juices are flowing, check out the second $10K project, a dog park, complete with cost and appreciation breakdown, at this link.

Standard disclaimer: Take nothing you read here at The Source as legal, accounting, or development advice!

(Photo credit: Wikipedia)

FiveThirtyEight: Airbnb Probably Isn’t Driving Up Rents Much

Data, data everywhere, but what are we to think?

A major consequence of the revolution in data collection is the rise of the data journalist – writers using tables of statistical data to tell useful stories in (hopefully) plain English.

What we do with these narratives is up to us, as is the decision of where we get them from. The leader in this kind of journalism is likely FiveThirtyEight.com, creation of Nate Silver, a statistical analyst and writer who moved from the world of baseball statistical analysis into electoral politics. Today, FiveThirtyEight.com also covers business issues, starting by counting some kind of event or transaction and extrapolating from there.

That basic formula is on display in the recent piece by Ariel Stulberg, who asks: are apartment rents rising due to the market influence of space-matching service Airbnb?

Not just yet, says Stulberg:

[A] FiveThirtyEight analysis of Airbnb booking and revenue data provided by consulting firm Airdna gives the most rigorous look to date at how many units Airbnb could be taking off the rental market nationwide. It shows that Airbnb’s impact is probably still small in most cities, but it also shows that a disproportionately large share of the company’s revenue comes from the listings that most worry its critics — homes that are rented out for a large portion of the year. That could give the company an incentive to focus on increasing such listings as it grows — something some experts believe may already be happening.

Airbnb disputed the analysis but declined to provide its own data.

Because Airbnb has developed from its origins as a site matching travelers to spare rooms into a site that includes so-called commercial listings of whole units rented out full-time, the economic impact is worth looking at.  Sharing economy technologies tend to be very disruptive in their effect upon established industries.  Airbnb commercial listings, according to the piece, add up to only one tenth of total listings but account for over a third of host’s revenue. With that kind of balance on display it would be fair to assume that traditional apartment inventory in certain markets could be lost to the general market in the chase for those revenues.

On the other hand,  the balance between “commercial” Airbnb listings is very uneven between markets.  West coast towns such as Portland, OR and Los Angeles are where nearly half of all cash spent by Airbnb travelers goes to commercial hosts.  Meanwhile, NYC shows about only 30% of the same kind of spending.

If apartment inventory trends in any of the top 25 markets in the US is of importance to you, check out the rankings in Stulberg’s Airbnb piece here.

 

When An Apartment Complex Anchors A Baseball Player’s Contract

English: KC Royals player George Brett bats du...
George Brett, Kansas City Royals, 1980

I stand before you as an unapologetic, lifelong baseball nut, proud to announce that my Chicago White Sox stand today atop the American League behind excellent pitching and regular outbursts of offense courtesy of Todd Frazier, Melky Cabrera and Adam Eaton.

I hear you ask: great, but what in the world does baseball have to do with apartment complexes?

If anybody would make the connection, it would be yours truly.

Come with me to Kansas City. Rewind to 1987. There we will find Kansas City Royals legend George Brett facing contract negotiations with the team’s then-owner, apartment developer Avron Fogleman.

Brett, a twelve-time All-Star third baseman, is just past the peak of his twenty-year career and commands a salary among the highest of his day – over $2 million.

But there’s a very unique wrinkle in this deal: it’s an apartment complex in Nashville called Country Squire Apartments, developed by Fogleman. Still standing today, this 1,100 apartment complex was completed that year.

Amazingly, equity in the project, plus a buyback agreement, served as a source of compensation for Brett and his teammates Dan Quisenberry and Willie Wilson.

The NYT’s Murray Chass wrote in 1987 on the deal:

The contracts, which are linked to Fogelman real-estate projects in Nashville and Memphis, where he lives, are probably the most difficult in baseball on which to place a value. The amount of money the players will receive from the real-estate deals makes them so.

Assessing the contracts on the best information available, however, the three Royals will be among the 10 highest-paid players this year. The values of their contracts for 1987:

Quisenberry $2,293,509 Brett $2,205,000 Wilson $1,935,296 In salary alone, Brett will earn $1.5 million, Wilson $1 million and Quisenberry $800,000. But there are those real-estate deals. Brett’s contract is tied to Country Squire Ltd., a 1,100-apartment complex in Memphis that is scheduled for completion this summer. Quisenberry’s and Wilson’s financial packages are tied to Stewart’s Ferry Ltd., a 700-apartment complex in Nashville that has recently been completed.

Brett is guaranteed a minimum cash flow of $1 million from Country Squire until December 1991. At the third baseman’s choice, the Royals will buy his 10 percent interest in Country Squire for $2 million.

Both the term and the nature of these development-equity driven contracts are very unique both to baseball and to apartment development — but in one sense, it was just another day in the marketplace, matching value in one place (third base) to value in another (Memphis).

Photo credit: Wikipedia

Video: How To Buy A 13-Unit Apartment Building

Matt Faircloth of New Jersey’s Derosa Group is a small real estate investor getting bigger, and he took some time to make a good video about how.  Getting investors together for a 13-unit multifamily property represented a big milestone – one that many in the residential space have on their minds as they eye ways to break into the commercial real estate industry.

Concise and personable, Fairlcoth’s clip tells the story of moving from investing in duplexes to a seven-figure property – snagging the building for below market to boot. Definitely worth a look.

“Building Distress” — And How NYC Models It Using Data

Residential apartment building in Harlem, NYC ...

In the multifamily building, operational problems can go hidden for a very long time, affecting performance for owners and managers as well as quality of life for tenants. If there’s one thing technology has done to commercial real estate, it has been to expand the amount and variety of information that can be captured about a property, all with the idea of revealing such problems.  A significant portion of the new tools and techniques for information collection are there for the use of managers and owners — capabilities ranging from smart meters for water and electricity usage to using software to shape the ideal mix of amenities.

To get a great update on the state of building data collection sensors and other items that fall under the “Internet of things”, check out this excellent free webinar from Chad Curry, Managing Director of NAR’s Center for REALTOR® Technology.

Technology’s giant impact on the commercial property industry means government is also in the business of collecting information on property performance.  As various governmental departments of New York City have recently demonstrated, it’s a task at which they can excel.

NYC Does Numbers

City agencies in NYC compile a great deal of information about commercial properties of all kinds, and in the multifamily sphere, they tend to focus less on economic performance and more on health and safety concerns. What’s worth noticing here is the degree to which these previously far-flung agencies are now actively sharing data, leading to new categorizations that affect, or potentially affect, landlords and managers.

Tenant complaints, court outcomes, code violations, liens, foreclosures — in the past, all were collected separately and stayed in separate piles.  That era is over.

“Building Distress”

Knitting together these categories of information under a single governmental warehouse is the Mayor’s Office Of Data Analytics (MODA) and the Department of Housing Preservation and Development (HPD).  One key result of all this collection and focus on the entire profile of a multifamily property is the notion of “building distress”.

An eye-opening blog post about this process and about “building distress” was published at DataLook’s blog,   The fundamental takeaway should be a wakeup call to owners and operators of multifamily property.  The technologies and techniques being used in NYC are in no way solely the domain of huge cities.  Which means that no matter where you own, your relationships with local government could soon enter a phase where scrutiny of your property is going to be informed by more history of that property than has ever been mustered at any one time.

Bell Apartment Fund V Announces $425 Million of Total Equity Commitments

 

Private equity real estate fund, Bell Partners, Inc. Fund V will invest in quality apartment complexes in highly desirable locations with value-add potential in the Western United States, across the East Coast and in the Southwest.

Bell Partners, Inc. founded in 1977 is now the 11th largest apartment operator and 7th largest apartment renovator in the United States according to the National Multi-Housing Council.

Bell Partners, Inc. has completed their final round of funding for $425 million total equity commitments.  Bell Partners is considered to be one of the highest “top performing, consistent” real estate fund managers for the second year in a row by the 2015 Preqin Global Real Estate Report.

Jon Bell, president of Bell Partners, Inc. said in a press release, “We are very pleased with the reception that Fund V received from domestic and international investors.  The positive investor response to the Fund demonstrates confidence in Bell’s strategy, management team, and vertically integrated operating platform, as well as recognition of our strong track record.  We are confident that this investment opportunity will generate attractive current income and provide strong total returns.”

Since 2002, Bell Partners Inc. has invested $10 billion of apartment investments on behalf of its investors. Bell invests in multifamily properties in targeted areas and some transitioning areas that can through renovation create high-quality communities in supply-constrained submarkets near major employment centers and other amenities.

National Association of Realtors’ latest Commercial Real Estate Outlook offers overall projections for four major commercial sectors: multifamily markets, industrial, retail and office developments. Historic data for several metro areas were provided by REIS, Inc., a source of commercial real estate performance information.

 

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The 10 Most Influential Women in Multifamily

Over the last decade, women have made great strides in the commercial real estate world. We have have witnessed the industry change since the days when women had far fewer inroads to success in commercial real estate. Back then, many in leadership were concerned that a woman would leave her career track for marriage and a family. That assumption is long gone and women have taken the commercial real estate industry by storm.

CREWing The Ship

Organizations have risen to document and foster this change. Commercial Real Estate Women  — CREW Network — was founded in 1989 with a mission to focus on the advancement of women in commercial real estate, have grown to forty markets across North America and can boast a membership of 9,400 today.  CREW focuses on helping female CRE professionals achieve goals related to business development, leadership development, career outreach, industry research and business development.

In the spirit of CREW, Multifamily Executive magazine recently published a wonderful list of the ten most influential women in multifamily. Most of the women attribute their success to having strong mentors and other women who they could look up to. Many of these women belong to organizations like CREW who  provide that support network that we all could have use at one time or another.

Please take a moment to be inspired by these women right here. Compiled by Kayla Devon they are:

1. Ava Goldman –  President, Michaels Development

2. Lilli Dunn – Chief Investment Officer, Bell Partners

3. Deidre Kuring – President, WinnResidential

4. Julie Smith – President, Bozutto Management

5. Terri Ludwig – President, CEO Enterprise Community Partners

6. Sheryl Brown – Chief Financial Officer, Mill Creek Residential

7. Cindy Clare – President, Kettler Management

8. Sue Ansel – CEO, Gables

9. Amy Anthony – President and CEO, Preservation Of Affordable Housing

10. Mary Anne Gilmartin – President, Forest City Ratner Cos.

Read the entire rundown at Multifamily Executive Magazine

Where Else Is Diversity Celebrated?

Other associations formed to support a diverse group of commercial real estate professionals include:

  • National Association Of Real Estate Brokers(NAREB)-Founded over sixty years ago to support African American real estate professionals.
  • The National Association Of Gay & Lesbian Real Estate Professionals (NAGLREP)-A mission driven trade organization that is part business and part advocacy for LGBTQ housing rights.
  • The National Association Of Hispanic Real Estate Professionals (NHREP)- The voice of Hispanic real estate and home ownership.

“Mommy, Mommy, look at the maintenance!”

Cover of "Miracle on 34th Street (Special...
Cover via Amazon

I know this astonishing New York Times piece “When The 13-Year-Old Picks A $14 Million Condo” looks only at a few super-wealthy families and how some of them select apartments and condos in Manhattan, and I know that as such it doesn’t represent how the majority of families look for multifamily dwelling in the remaining 99.9% of the United States.  Even with all that being the case, I can’t help but wonder how it’s possible that an apartment story – or any real estate story — can give me the willies as much as this one did.

It’s one thing to involve your kids in important decisions. It’s perfectly fine to try to inculcate in kids a sense of propriety and shrewdness in making the arrangements that affect them. Taking an interest in the numbers, the locations, the social and economic conditions in which we live is all better done earlier than later in life because forewarned is forearmed.

But it’s something else entirely — something unseemly — when the super-rich hand over the process of finding new Manhattan digs to their kids, creating a kind of internet-fueled churn where brokers email cc: listings data to the teen sons and daughters of buyers.  It’s not that the kids aren’t qualified to compare and contrast the pros and cons of one luxury condo vs. another – in a lot of ways, they are. What boggles the mind is considering at what age it ends.  Twelve?  Ten?  Eight?  What’s the age cutoff where pointing and clicking — and working to close on — eight-figure luxury properties stops being plausible and starts being ludicrous?

Bonnie Hut Yaseen, an associate broker at Fox Residential, is used to the youth vote by now. “I’m seeing this trend where parents are coming in to look at my listings and proudly announcing that it was their son or daughter who found it,” she said. “They’re finding an unexpected resource in their children.”

Of course, there is cinematic precedent for all this. In the 1947 classic “Miracle on 34th Street,” a skeptical little girl will believe in Santa Claus only if he can arrange the acquisition of a house she saw in a magazine listing.

Ms. Yaseen said that in the past children saw their homes-to-be only when it was time for the parents to assign them their bedrooms. “Now, in some cases, the kids are coming on the first visit to an apartment because they want to know if it’s as good in reality as it looked online,” she said. “They’ll sometimes be there with paperwork, with a printout from a website.”

Read the entire story at the New York Times

Handling Deal Volume, Rent Increases In Multifamily

How far we’ve come from the days following the market meltdown. For many working multifamily deals, in the post-recession era the conversation has shifted from talking about short sales to talking about how to get credit to now talking about how to handle deal flow.

So deal flow is back. It’s a “target-rich” environment out there. But how best to handle deal flow in multifamily? Elliot Throne, Managing Director of national firm HFF talked to Globe Street’s Jennifer LeClaire about exactly that.

GlobeSt.com: How do you get creative to make the deal work for all parties?

Throne: Easy. Provide clear and concise information to all parties. The buyer needs to know they have looked at every angle and will not be faced with any surprises. They also need to see a real vision as to how they can successfully enhance value within the asset.

Lenders need to know they are also getting all important insight so they can quickly determine how aggressive they can be to win the deal. Everyone is chasing so many deals right now that it’s important to make sure prospective parties can effectively capture this business—if they are willing to get aggressive—without being concerned about missing out on other potential deals on their plate. With aggressive pricing comes a very slim margin of error and nobody can afford to have deals fall out and drag on longer than necessary. 

In a previous interview, Throne had more to say about the specifics of multifamily in South Florida:

GlobeSt.com: What challenges do you see for multifamily in the [South Florida] local market?

Throne: We are seeing additional projects being delivered but it’s still at a pace that can easily be absorbed. Older assets are being renovated up to a higher quality and owners are successfully being able to raise their rents to bridge the wide gap between what new developments are charging. The main concern, not just locally but nationally, is how high we can keep pushing rents before serious resistance kick in. There is no question that there is additional room … it’s just how much?

Aggressive pricing, aggressive rent, worrying about missing out on the right deal instead of clutching desperately to a a single deal – it’s a very different multifamily marketplace than we had in 2008.