01 May May 1, 2020 Multifamily Investment News

Here are a collection of links to articles I’m reading now to stay abreast of the fast changing multifamily environment during the COVID Pandemic.

MHN Article – Six Feet of Separation: Apartment Communities Prepare for Life After Quarantine

• “It won’t be business as usual for the foreseeable future. Until there is a vaccine or a treatment, masks and social distancing will continue to be the new normal driving operations at apartment communities even after commerce and other activities are permitted to reopen.”
• “The first thing we did was make sure that our employees were safe,” says Finkel. “We locked the doors to our leasing centers. Our teams are onsite, but they each have their own space because we’ve turned unrented units into offices.”
• “Providence has seen a surge of leasing during the pandemic, with good results enabled by technology. Finkel predicts that on-site self-guided tours will take off when stay-at-home restrictions are removed. Using locking and unlocking remote doors, prospects will be able to practice social distancing as they walk through the property and see the model without having to be with a leasing associate.”
• “During the pandemic Camden’s maintenance teams have developed sanitizing protocol for high touch areas and this will continue into the the future. All team members have use of wipes, gloves and masks.”
• “Maintenance teams have only been completing emergency service requests for plumbing, AC or major appliance repairs. Residents are asked CDC screening questions regarding health of occupants, and service for any apartment with confirmed sick occupants happens either virtually with a Camden team member walking a resident through minor repairs via Skype, or a maintenance team member self-help YouTube video, or a third party company trained in virus response assists with completing work in the apartment.”
• “Often, our teams are able to drop off supplies for apartment repairs that residents have been able to use to take care of their own needs. We have been pleasantly surprised with how few backlogged service tickets we have “
• “The timely procurement of, and need for, personal protective equipment (PPE) supplies as well as additional cleaning supplies, hand sanitizer, etc., must also be assessed. “They are critical to maintaining an environment that follows CDC recommendations,” adds Summers. “The appropriate signage needed to cue residents, building access, deliveries and more must also be vetted to ensure expectations are set for all who will be accessing the community and corporate offices.”

GlobeSt.com Article: In the Middle of a 1031 Exchange? Be Patient.

• “It is difficult to acquire and finance projects during any unanticipated crisis—as evidenced by the COVID-19 pandemic—but things will get easier and improve over time,”
• “The Notice extends both the 45-day deadline and the 180-day deadline—if those deadlines would have expired on or after April 1, 2020 to July 15, 2020,” explains Jelsma. “Thus, if the investor’s identification period was open as of April 1, 2020, it is automatically extended to July 15, 2020. Similarly, if the 45‑day identification period had expired before April 1, 2020 but the 180-day exchange period was open as of April 1, 2020, the 180-day exchange period is extended to July 15, 2020.”
• • If the sale of a replacement property occurred on March 3, 2020, the 45th day would have been February 17, 2020 and the 180-day exchange period would have expired on July 1, 2020. As a result of the Notice, the date for identifying replacement property remains February 17 but the 180-day exchange period is extended from July 1, 2020 to July 15, 2020.
  • If the sale took place on April 1, 2020, the 45th day would have been May 16, 2020. The period for identifying the replacement property is extended from May 16, 2020 to July 15, 2020 but the property would still need to be acquired by September 28, 2020.
  • If the taxpayer’s relinquished property sold on January 23, 2020, the 45-day identification period would expire on March 8, 2020 and the 180-day exchange period would expire on July 21, 2020. This exchange is not impacted or benefited at all by the issuance of the notice.”Jelsma offers a number of examples:
    For reverse exchanges, the same deadline extensions apply, meaning the owner must choose a property for sale within 45 days, and the exchange must be complete within 180 days.”

GlobeSt.com Article: While Resilient, Multifamily is Not Immune to COVID-19

• “Demographic trends favor continued multifamily demand.”
• “many businesses are now operating remotely so flexible shelter or renting versus owning remains desirable”
• “graduating students with high debt will most likely choose to rent because securing a mortgage remains challenging”
• “In a volatile market, multifamily real estate will remain a solid investment for pension funds and REITs.”
• “Emergency-level interest rates will also be a boon to long-term investors.”
• “Tenant turnover is expected to decrease dramatically, reducing the operating and capital costs of securing new tenants.”
• “As telecommuting remains in a post-coronavirus world, the demand for apartments particularly by young professionals could increase.”
• “Vacancy rates should remain low with the decline in construction of new units.”
• “Class-A apartments, which tend to house workers in growth-oriented industries, will fare better than class-B and-C apartments that house tenants in a mixture of economic sectors. This is especially true for class-C apartments, with many renters in the entertainment and food sectors.”
• “Tourist-reliant regions that depend on leisure and travel will be more deeply impacted such as California, central and south Florida, Hawaii, Las Vegas, New Orleans and New York.”
• “Freddie Mac’s multifamily COVID-19 program provides three months of forbearance for multifamily borrowers and tenants.”
• “The government may also push for further legislation or executive action that will allow local jurisdictions to implement prohibitions on both evictions and foreclosures.”
• “The Coronavirus Aid, Relief and Economic Security Act provides for an expansion of unemployment benefits to include people who are not normally recipients, and a loan and grant program for small businesses to help maintain payrolls throughout this emergency period. This, plus the subsequent Paycheck Protection Program and Health Care Enhancement Act, aim to help tenants who cannot cover April, May or June rents.”

GlobeSt.com Article: What Can SoCal Learn From Past Recessions?

• “According to research from JLL, the Los Angeles office market outperformed..Los Angeles’ office market had an average 11% peak-to-trough decline between the last two recessions, while Orange County had a 22.3% peak-to-trough decline. By comparison, the US office market declined 13% peak-to-trough. Los Angeles also recovered faster, reaching pre-recession rents in 5.3 years, while Orange County took 7.5 years to reach peak rents again. This data could prove useful in predicting office activity patterns during a downturn.”
• “For Southern California, the good news is there is stronger economic diversification than we had in both the previous recessions.”
• “Los Angeles and Orange County had similar increases in vacancy rate. Los Angeles vacancy increased 600 basis points on average over the last two recessions and Orange County saw an only slight higher 690 basis point increase in office vacancy.”

CoStar Article: San Diego Apartment Landlords Brace for Uncertain Times