Summary
- MAA facing oversupply challenges across Sunbelt markets
- KRR sees remainder of 2024 as “sweet spot” for real estate investments
- Equity Residential raises revenue projections heading into remainder of 2024
- Freddie Mac financing fewer multifamily housing compared to last year
- SomeraRoad’s first multifamily development in St. Elmo
- Decron Properties acquires Citizen House in Pflugerville for $77.2M
- U-Haul: San Antonio and Austin are pulling new residents from the same sunbelt metros (LA, Phoenix, and Denver)
- San Antonio airport getting new flight to Guadalajara
- Major infrastructure project is planned in Eagle Pass to support the #1 port in the U.S. (Laredo)
National and State News
Apartment Giant MAA Sees Path Through Its Supply Glut Problem (CoStar)
- Why it matters: Sunbelt pricing weakness bottoms amid record number of openings.
- In order to overcome the challenge of oversupply in the rental market, Mid-America Apartment Communities (MAA) is prioritizing resident retention and expects lease rates to improve as new supply decreases.
- MAA achieved a 0.5% increase in rent growth during Q2, primarily due to a 4.6% rise in lease renewal rates. The company's average physical occupancy rate of 95.5% and historically low resident turnover rate also contributed to offsetting a 5.1% decline in asking rents for new leases.
- In Q2, MAA invested close to $80 million in development. Executives have announced plans to expand the company's development pipeline, aiming for investments totaling $1 billion. This represents more than double the value of MAA's development pipeline in 2022, which amounted to $450 million.
KKR Sees 2024 As “Sweet Spot” for Real Estate Investing (CoStar)
- Why it matters: New York firm’s largest apartment purchase to date leads billions in Q2 ’24 deals.
- During the second quarter, KKR made an $8 billion investment primarily in real estate. This included their largest multifamily acquisition to date, purchasing around 5,200 apartment units from Lennar's Quarterra division for $2.1 billion.
- KKR's chief financial officer, Rob Lewin, stated on an earnings call that the deal was conservatively priced with an expected unlevered return of 8%, presenting significant upside potential and a compelling risk-adjusted return. However, the first-year yield on the portfolio is projected to be in the low 4%.
- Lewin further commented, "The combination of increasing yields over time and the expected appreciation of the asset make this deal truly interesting, and we are excited to pursue it for the long term."
- Co-CEO Scott Nuttall expressed that 2024 could be a favorable year, with attractive values and high activity levels. This contrasts with the previous year when values were attractive, but transaction volumes were lower due to owners of mature assets avoiding selling or financing in a constrained market.
Equity Residential Raises Forecast, Riding Job Growth, High Occupancy (CoStar)
- Why it matters:?High-end apartment owner increases revenue nearly 3%.
- With robust demand, high occupancy rates, and limited turnover in coastal markets, Equity Residential has revised its revenue projections for the second half of 2024 and expects strong growth.
- Following a 3% revenue increase in the second quarter, the company has raised its annual revenue growth guidance from 2.9% to 3.2%.
- Equity Residential noted that move-outs attributed to high rental rates have fallen below long-term averages. Additionally, with a 20% income-to-rent ratio indicating appropriate rent increases, the company reported a rise in occupancy rates to 96.2%. This increase is largely due to the higher costs of single-family housing and a manageable supply of new apartments.
Freddie Mac’s Income Falls As High Interest Rates Slow Lending (CoStar)
- Why it matters: Freddie Mac finances fewer single-family homes and multifamily housing compared to last year.
- Despite a 6% decrease in net income to $2.8 billion compared to the same quarter of the previous year, Freddie Mac experienced a growth in its total asset value, which rose from $42 billion to $53 billion.
- During Q2, Freddie Mac provided $96 billion in liquidity to the mortgage market, supporting 349,000 home purchases, refinancings, and rental units. While this liquidity volume matches the performance of the same period last year, the company financed fewer units compared to the previous year's figure of 372,000.
- In terms of multifamily loans, Freddie Mac acquired $11 billion and provided financing for 92,000 rental units. This represents a decline from the year-earlier quarter when the company held an unpaid balance of $13 billion and financed 114,000 multifamily rental units.
Austin News
St. Elmo Public Market owners plans multifamily development next door (ABJ)
- Why it matters: SomeraRoad’s first project in Austin and developers marking 10% of the units as affordable.
- With the support of Austin's Density Bonus 90 Program, SomeraRoad has plans to develop this project in the vibrant St. Elmo district.
- The initial plan includes 230 units, with 10% of them being priced for rental at 50% of the median family income. As of June 2023, the median family income for a four-person household stood at $122,300.
- Instead of the initially intended public market, the 42,000-square-foot building will now be fully leased by Pins Mechanical and 16-Bit Bar+Arcade, two entertainment retail concepts.
- Construction for the market's redevelopment is currently underway and is projected to be completed during the first quarter of 2025.
LA real estate firm enters Austin metro with $77M purchase (ABJ)
- Why it matters: Decron Properties has entered the Texas market with the acquisition of 334-unit Citizen House in Pflugerville for $77.2 million on July 29 from Endeavor.
- Decron's CEO, David Nagel, expressed the company's aim to enter the Austin market with the purpose of expanding and strengthening their multifamily portfolio. He emphasized their strategy of strategic acquisitions in affordable markets with robust job growth, similar to what they accomplished in Phoenix between 2020 and 2022.
- Decron has further plans to continue expanding its portfolio in the Austin area. The company intends to acquire 1,000 or more apartment units in Austin within the next two years.
San Antonio News
Halfway into 2024, here's where most new San Antonians are coming from (SABJ)
- Why it matters: San Antonio and Austin are pulling new residents from the same sunbelt metros (LA, Phoenix, and Denver).
- According to the moving company, at the start of the year, Texas surpassed Florida to claim the number one spot as the fastest-growing state. North Carolina, South Carolina, and Tennessee ranked in the top five growth states for 2023.
- Apart from Texas, the primary states from which residents relocated to San Antonio were California, Florida, Colorado, and Arizona. The leading source metros for incoming San Antonians also hailed from these states, with Phoenix taking the top position, followed by Denver, Los Angeles, and Colorado Springs.
- Among residents relocating within the state, the majority came from Houston, followed by Dallas and Austin. The cities of Brownsville and McAllen in the Rio Grande Valley region ranked at number four, with Corpus Christi completing the list.
- The main sources of non-Texan residents moving to Austin were Los Angeles, Phoenix, Denver, Atlanta, and Oklahoma City.
San Antonio airport getting new flight to Guadalajara (SA Express News)
- Why it matters: International commerce ties continue to strengthen southward as San Antonio increases direct flight options to Mexico.
- Starting on December 2, Viva Aerobus will introduce a new route between San Antonio International Airport and the popular destination of Guadalajara, which is renowned for business and vacation purposes. This route will operate four times a week, shuttling passengers between San Antonio and Guadalajara International Airport situated in Mexico's Jalisco Valley.
- In addition, Viva Aerobus has plans to enhance its service between San Antonio and Monterrey, Mexico. Currently operating twice a day, the airline intends to increase frequency to three times a day on Mondays, Wednesdays, Thursdays, Fridays, and Saturdays.
- Viva's CEO, Juan Carlos Zuazua, expressed in a written statement that the four new routes to the USA will contribute to strengthening international connectivity in the region. He also emphasized the company's recognition of the tremendous potential in the Guadalajara market.
New border trade crossing moves forward with environmental impact study (SABJ)
- Why it matters: A sign of the intense nearshoring activity, a major infrastructure project is planned in Eagle Pass to support the #1 port in the U.S. (Laredo).
- The Surface Transportation Board (STB) has announced the final scope of an environmental impact study for a new rail crossing in the Eagle Pass area. This rail line is a vital component of the multi-modal crossing project planned by Puerto Verde Holdings, a San Antonio firm collaborating with Maverick County to construct a trade bridge north of the city. The trade bridge is intended to facilitate vehicular, rail, and pedestrian traffic.
- In May, President Joe Biden granted the company a permit to proceed with the construction of the Puerto Verde Global Trade Bridge. However, before construction can begin, the project requires numerous other approvals, including a permit for the rail portion from the STB.
- The STB has outlined its timeline for the environmental impact study, aiming to release a draft in the second quarter of 2025. The final version of the study is anticipated to be available by the end of 2025, prior to permit approval.
