Tag Archives: apartment

Colorado Springs Vacancy Drops in 3rd Quarter

Thanks in large part to new army troops arriving at Fort Carson from Fort Hood in Texas, the area vacancy rate dropped to 8.6%, down from 9.2% for the same period in 2008.

Ironically, in the areas nearest Fort Carson, the vacancy rate stood at 16.9% in the 3rd quarter. Even though that was higher than most parts of the Springs, it was down considerably from the 36.3% rate in the 3rd quarter of 2006.

Unfortunately for property owners, the decreased vacancy did not lead to higher rental rates. The average rate at the end of the quarter was $695.40 a month, down from $717.65 in the 2nd quarter of 2009.

Capmark Financial on the Ropes

Capmark Financial Group is heading towards default, as the troubled lender weighs whether to file for bankruptcy after posting a $1.6 billion loss for the second quarter.

It’s a steep fall from grace for Capmark, who originated more Freddie Mac and FHA debt than any other lender last year and has consistently been one of the industry’s most prolific financiers since spinning off from GMAC Commercial Finance in 2006.

The firm has been bleeding staff and shutting offices this year, as it struggled to pay its corporate debt, which totaled about $1.5 billion. “When they went private through the spin-off from GMAC, they took on quite a bit of debt,” says Chris Wolfe, managing director of Fitch Ratings, which, along with Moody’s, downgraded Capmark earlier this month. “And they essentially violated a covenant at the end of last year. The writing was on the wall at that point.”

Read the rest of the story here: http://ow.ly/qmym

Springs Apartment Vacancies Fell in Second Quarter

August 10, 2009 4:38 PM

THE GAZETTE

Apartment vacancy rates fell to 9.8 percent in the second quarter in Colorado Springs, according to the Colorado Springs Metro Area Apartment Vacancy and Rent Study prepared for the Apartment Association of Southern Colorado and the Colorado Division of Housing. That’s down from a 10.2 percent vacancy rate in the second quarter a year ago and an 11.7 percent vacancy rate in the first quarter of 2009.
Rental rates are climbing as vacancies fall, with the average rate rising to $717.65 per month, up from $693.46 in the first quarter and up $11.14 from the second quarter a year ago.

Prediction: busy season ahead for multifamily landlords

by Becky Hurley, Colorado Springs Business Journal

Published: May 29,2009

It doesn’t take a fortune teller to predict that soldiers will come, and they will go – especially during war time.

About 3,000 members of the 4th Brigade Combat Team moving to the Pikes Peak region from Fort Hood and returning from Iraq have begun to arrive. Many have visited their newly assigned post and have scouted around for a place to live, said Laura Russman, executive director for the Apartment Association of the Pikes Peak Region.

At the same time, 3,000 or so of their fellow soldiers assigned to Fort Carson will leave during June and July for Iraq and Afghanistan.

This see-saw scenario is a familiar one, especially for area landlords. One minute multifamily owners are tilting optimistically toward the prospect of increased occupancies, and the next, they’re waiting for the ship-out “boot” to drop.

Push and pull

So how does this constant in-and-out activity accompanied by economic uncertainty affect apartment owners in and around local military installations?

Based on a first quarter 2009 Apartment Vacancy and Rent Survey, the Colorado Department of Housing and Denver University economist Dr. Gordon Von Stroh said Colorado Springs saw an overall 11.7 percent vacancy rate.

A similar survey completed by Apartment Insights determined the average local vacancy rate stood at about 9.9 percent. The difference probably is attributable to the state’s inclusion of all for-rent complexes of 10 units or more. The AI report covers only apartment communities of 50 units or larger.

“The smaller complexes also tend to be older – maybe built 30 or 40 years ago,” Russman said. “Most Fort Carson soldiers can make at least $1,200 or $1,300 in a housing allowance. That allows them to rent newer apartments with more amenities.”

The good news: many soldiers prefer renting apartments or homes off post because if they have money left over, they can spend it on other things. “If they live at Fort Carson, their entire allowance has to go to pay for where they live,” she said.

And most stay geographically close to their assigned unit.

Good and bad

Kelley Crance-Agnew, manager of the 208-unit Village at Westmeadow, just outside the gate at Fort Carson, said the complex is more than 96 percent leased. That’s up from less than 90 percent during January.

“It’s a blessing and a curse,” she said, referring to the community’s location at Fort Carson’s front door. “When the troops come in, we’re one of the first places they hit. We can sign 20 or 30 leases in a week’s time. But when they get their orders, they’re gone. Last year, within six weeks’ time, we had 45 soldiers vacate. But you get used to it – and budget accordingly. And we do see a full 100 percent turnover each year – that’s even more than in (college) student towns.”

Fort Collins, home to Colorado State University, which has more than 30,000 students, reported falling, rather than rising vacancies for the quarter. Continue reading

Buying an Austin Apartment at 8 Cap vs. 9 Cap

I’ve been studying a property in Austin, Texas lately. It’s an 84-unit apartment that was rehabbed “down to the studs” in 2005. The owner recently installed artificial bermuda grass to reduce maintenance and improve appearances. There is also an outside video surveillance system that is accessible via a password-protected web page.

The asking price is $3.7 million, which given the NOI (see Jargon Explained page) of $295,000 results in a cap rate of 8%. This means that if you had no debt on the property, you would produce an 8% annual return. With a 25% down payment and $185,000 in acquisition and closing costs, the cash-on-cash return would be 10.2%. Giving the investors 75% of the cash flow, they would expect to receive about 7.65% return on their investment. Not bad, but I’m looking to get them at least an 8% return before their 75% share of the back end profits. 

Yesterday I had a long talk with John Dennis, a property manager with over 30 years experience in the Austin market (http://www.jldpropertiesinc.com/). One of his services is every six months taking the NOI of the property and combining it with the current Austin cap rate to give a current value. I asked him what he was quoting as the current cap rate in Austin and he said it was 9%. 

So, if we use that figure to calculate the value, we lower it to $3,275,000. At that price, we could put down 30% and still raise the cash-on-cash return to 12.1%, giving the investors a return of better than 9%. This, combined with a current vacancy of only one unit, and the fact that Austin ranks number 1 in job growth among large cities for last year, makes this a very attractive investment. We’ll have to see if the current owners are interested in selling at this price.