Comments on: Comment of the Day: The Shelf Life of Apartment Complexes http://swamplot.com/comment-of-the-day-the-shelf-life-of-apartment-complexes/2012-07-03/ Houston, Texas real estate development, home buying, landscape, and design Fri, 24 May 2013 20:52:34 +0000 hourly 1 http://wordpress.org/?v=3.0.1 By: Cody http://swamplot.com/comment-of-the-day-the-shelf-life-of-apartment-complexes/2012-07-03/#comment-253183 Cody Fri, 06 Jul 2012 02:03:23 +0000 http://swamplot.com/?p=43734#comment-253183 markd: ah, cool area. We have some places on the 1800 block of w main and 1400 block of Marshall. I don't think either of those are IN Winlow but we have you surrounded :) . There is some stuff there I've tried to get. Not easy though. markd: ah, cool area. We have some places on the 1800 block of w main and 1400 block of Marshall. I don’t think either of those are IN Winlow but we have you surrounded :)
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There is some stuff there I’ve tried to get. Not easy though.

]]> By: markd http://swamplot.com/comment-of-the-day-the-shelf-life-of-apartment-complexes/2012-07-03/#comment-253125 markd Thu, 05 Jul 2012 23:11:59 +0000 http://swamplot.com/?p=43734#comment-253125 Cody - I stay in the Winlow Place section of the hood. Ten years now. Prior to that I was on the other side of Westheimer, in the Park Civic Association territory since about '86. Been lucky to have always enjoyed WAY under market rent for very decent places. Have had a couple great landlords who'd stay out of the way and also keep their places in good order. Cody – I stay in the Winlow Place section of the hood. Ten years now. Prior to that I was on the other side of Westheimer, in the Park Civic Association territory since about ’86.

Been lucky to have always enjoyed WAY under market rent for very decent places. Have had a couple great landlords who’d stay out of the way and also keep their places in good order.

]]> By: PYEWACKET2 http://swamplot.com/comment-of-the-day-the-shelf-life-of-apartment-complexes/2012-07-03/#comment-253032 PYEWACKET2 Thu, 05 Jul 2012 18:00:31 +0000 http://swamplot.com/?p=43734#comment-253032 I have to go with Spoonman here. I've always wondered who all these folks were that would constantly be walking to the "ground floor retail" that some whine about all the time. I own a now classic sporty convertible that I bought brand new in my youth. Silly me. I have kept it, maintained it, and can only drive it for a couple of weeks in the spring and a couple of weeks in the fall. Houston does have a miserable climate. I have to go with Spoonman here. I’ve always wondered who all these folks were that would constantly be walking to the “ground floor retail” that some whine about all the time.

I own a now classic sporty convertible that I bought brand new in my youth. Silly me. I have kept it, maintained it, and can only drive it for a couple of weeks in the spring and a couple of weeks in the fall.

Houston does have a miserable climate.

]]> By: ZAW http://swamplot.com/comment-of-the-day-the-shelf-life-of-apartment-complexes/2012-07-03/#comment-253028 ZAW Thu, 05 Jul 2012 17:52:50 +0000 http://swamplot.com/?p=43734#comment-253028 Excellent point, Old School. I would just note that every neighborhood is different. First-floor retail may not be an appropriate addition to every neighborhood. 'Contributing to the neighborhood' along Brays Bayou, for example, might mean providing a safe link to the Hike and Bike Trail for the public. In another part of town it could mean something else completely. It's a case by case thing. . To be fair, the same goes for single-family subdivisions. Compare The Woodlands to the FM-1960 corridor. In The Woodlands, subdivisions link up to walking paths and other public greenspace for everyone (not just the residents). They work together to form a cohesive whole. Along FM-1960, everyone's doing their own thing. You dont have walking paths. You dont have any kind of cohesion. Granted, in The Woodlands everything is controlled by The Woodlands Development Company, but still - is there any mystery as to why property values are more stable in The Woodlands than they are along FM-1960? Excellent point, Old School. I would just note that every neighborhood is different. First-floor retail may not be an appropriate addition to every neighborhood. ‘Contributing to the neighborhood’ along Brays Bayou, for example, might mean providing a safe link to the Hike and Bike Trail for the public. In another part of town it could mean something else completely. It’s a case by case thing.
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To be fair, the same goes for single-family subdivisions. Compare The Woodlands to the FM-1960 corridor. In The Woodlands, subdivisions link up to walking paths and other public greenspace for everyone (not just the residents). They work together to form a cohesive whole. Along FM-1960, everyone’s doing their own thing. You dont have walking paths. You dont have any kind of cohesion. Granted, in The Woodlands everything is controlled by The Woodlands Development Company, but still – is there any mystery as to why property values are more stable in The Woodlands than they are along FM-1960?

]]> By: TM http://swamplot.com/comment-of-the-day-the-shelf-life-of-apartment-complexes/2012-07-03/#comment-253024 TM Thu, 05 Jul 2012 17:45:39 +0000 http://swamplot.com/?p=43734#comment-253024 Spoonman - as a midtown resident I agree with Old School on the Post comment. Sidewalk culture does exist here and midtown is a shining example of it. The 2-3 months a year that it's super hot we might spend most of our time in the A/C. But outside of the July/Aug/Sep period we have 9 months of great outdoor weather! . Midtown is developing into a neighborhood with some staying power as investment keeps trickling into the area. I certainly don't see it going anywhere, especially if further investment can take care of some remaining elements that are impeding growth (Greyhound station, west end of 4th Ward to name two). Spoonman – as a midtown resident I agree with Old School on the Post comment. Sidewalk culture does exist here and midtown is a shining example of it. The 2-3 months a year that it’s super hot we might spend most of our time in the A/C. But outside of the July/Aug/Sep period we have 9 months of great outdoor weather!
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Midtown is developing into a neighborhood with some staying power as investment keeps trickling into the area. I certainly don’t see it going anywhere, especially if further investment can take care of some remaining elements that are impeding growth (Greyhound station, west end of 4th Ward to name two).

]]> By: Spoonman. http://swamplot.com/comment-of-the-day-the-shelf-life-of-apartment-complexes/2012-07-03/#comment-253017 Spoonman. Thu, 05 Jul 2012 17:01:59 +0000 http://swamplot.com/?p=43734#comment-253017 <b>Old School</b>, what can a few shops and restaurants do to make a place more desirable to live in? I just don't understand how ground floor retail works its unicorn magic in your world. And sidewalk culture is never going to exist in Houston. Houston has a miserable climate. Old School, what can a few shops and restaurants do to make a place more desirable to live in? I just don’t understand how ground floor retail works its unicorn magic in your world.

And sidewalk culture is never going to exist in Houston. Houston has a miserable climate.

]]> By: Old School http://swamplot.com/comment-of-the-day-the-shelf-life-of-apartment-complexes/2012-07-03/#comment-252979 Old School Thu, 05 Jul 2012 15:05:26 +0000 http://swamplot.com/?p=43734#comment-252979 Most of the 1990s apartment complexes that are still getting top rents have had significant work done to keep them competitive with the new builds. I used to live in a complex that was built in the late 1990s. While I lived there, they gutted the exercise room, computer/business lounge (the place with the free internet computers, fax/copy machine etc.) and rental office/club house. By the time I left, they were gutting each apartment when it turned over to put in new flooring, granite/stainless, etc. And this complex was barely ten years old when I left (they also had to do a significant structural repair to the garage, redo the pool area and get rid of the old pool drains that were a drowning hazard). If the market gets saturated and a renter's market ensues, no one will be willing to put up the capital to keep these complexes in good condition. Instead, they will drop the rents to keep them filled and do the minimal maintenance to keep the City inspectors at bay. I saw this when I lived out in the Galleria. I lived in an older garden style apartment that had undergone a couple of significant rennovations over the years. When I moved in, my neighbors were all professionals. The market for apartments in the Galleria saturated with a mini-building boom in the area. New owners took over the complex. No more criminal background checks, no income verification, pools turned green, security gates were broken all the time and so on. There was a murder, a swat stand off (separate incidents) and I regularly saw an Asian gang do drug deals in the parking lot. The main reason these complexes are so susceptible to boom bust cycles is that they are just housing. They do not create neighborhoods that are desirable to live in. They often come in after an area has become desirable for quality of life reasons. What people want to see is for these apartment complexes to make a contribution to the neighborhoods by having some ground floor retail and sidewalk culture. If you strung together enough Post Midtown complexes, you would have a great neighborhood. But, if you put a bunch of apartment boxes together, you just have a bunch of housing. Most of the 1990s apartment complexes that are still getting top rents have had significant work done to keep them competitive with the new builds. I used to live in a complex that was built in the late 1990s. While I lived there, they gutted the exercise room, computer/business lounge (the place with the free internet computers, fax/copy machine etc.) and rental office/club house. By the time I left, they were gutting each apartment when it turned over to put in new flooring, granite/stainless, etc. And this complex was barely ten years old when I left (they also had to do a significant structural repair to the garage, redo the pool area and get rid of the old pool drains that were a drowning hazard).
If the market gets saturated and a renter’s market ensues, no one will be willing to put up the capital to keep these complexes in good condition. Instead, they will drop the rents to keep them filled and do the minimal maintenance to keep the City inspectors at bay. I saw this when I lived out in the Galleria. I lived in an older garden style apartment that had undergone a couple of significant rennovations over the years. When I moved in, my neighbors were all professionals. The market for apartments in the Galleria saturated with a mini-building boom in the area. New owners took over the complex. No more criminal background checks, no income verification, pools turned green, security gates were broken all the time and so on. There was a murder, a swat stand off (separate incidents) and I regularly saw an Asian gang do drug deals in the parking lot.
The main reason these complexes are so susceptible to boom bust cycles is that they are just housing. They do not create neighborhoods that are desirable to live in. They often come in after an area has become desirable for quality of life reasons. What people want to see is for these apartment complexes to make a contribution to the neighborhoods by having some ground floor retail and sidewalk culture. If you strung together enough Post Midtown complexes, you would have a great neighborhood. But, if you put a bunch of apartment boxes together, you just have a bunch of housing.

]]> By: Cody http://swamplot.com/comment-of-the-day-the-shelf-life-of-apartment-complexes/2012-07-03/#comment-252744 Cody Thu, 05 Jul 2012 01:30:42 +0000 http://swamplot.com/?p=43734#comment-252744 "As it turns out, they have to make an educated guess about the future, close their eyes, hold their nose, and jump in." . Does swamplot have a sentence of the day? :) . Markd, where do you live if you don't mind my asking (you don't have to be specific). I'm curious as to your sarcasm level. “As it turns out, they have to make an educated guess about the future, close their eyes, hold their nose, and jump in.”
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Does swamplot have a sentence of the day? :)
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Markd, where do you live if you don’t mind my asking (you don’t have to be specific). I’m curious as to your sarcasm level.

]]> By: TheNiche http://swamplot.com/comment-of-the-day-the-shelf-life-of-apartment-complexes/2012-07-03/#comment-252692 TheNiche Wed, 04 Jul 2012 22:01:07 +0000 http://swamplot.com/?p=43734#comment-252692 ZAW, have you ever built and leased a new apartment complex anywhere in the Houston area (or anywhere)? What is your basis for claiming that it is an easy endeavor? I suspect that you have none. And has it ever occurred to you that developers (whose core competency is development) develop apartment complexes for long-term investors and operators? What you refer to as cutting and running is actually just an element of their business model. It is a hand-off of ownership from one entity preferring stability to another that demands it. Neither entity is assured of stability, however. A developer can't pretend (with a straight face) to know what is in store for a nation, a metropolitan area, or a submarket over a five-year period of planning, permitting, financing, construction, the first year of lease-up, the second year of burning through concessions, and the third year of stability so that they can generate a reliable set of T-12 profit and loss figures. As it turns out, they have to make an educated guess about the future, close their eyes, hold their nose, and jump in. The business model may be different, however the same lesson is analogous for subdivision developers and home buyers, too. They can only try their best to make the right decision, then hope for the best. But eventually...they all sell. Everybody sells. The only consequential purpose in owning real estate is to be able to sell it. If selling something is cutting and running, then our entire society is founded on cowardice. ZAW, have you ever built and leased a new apartment complex anywhere in the Houston area (or anywhere)? What is your basis for claiming that it is an easy endeavor?

I suspect that you have none.

And has it ever occurred to you that developers (whose core competency is development) develop apartment complexes for long-term investors and operators? What you refer to as cutting and running is actually just an element of their business model. It is a hand-off of ownership from one entity preferring stability to another that demands it. Neither entity is assured of stability, however.

A developer can’t pretend (with a straight face) to know what is in store for a nation, a metropolitan area, or a submarket over a five-year period of planning, permitting, financing, construction, the first year of lease-up, the second year of burning through concessions, and the third year of stability so that they can generate a reliable set of T-12 profit and loss figures.

As it turns out, they have to make an educated guess about the future, close their eyes, hold their nose, and jump in.

The business model may be different, however the same lesson is analogous for subdivision developers and home buyers, too. They can only try their best to make the right decision, then hope for the best. But eventually…they all sell. Everybody sells. The only consequential purpose in owning real estate is to be able to sell it. If selling something is cutting and running, then our entire society is founded on cowardice.

]]> By: markd http://swamplot.com/comment-of-the-day-the-shelf-life-of-apartment-complexes/2012-07-03/#comment-252676 markd Wed, 04 Jul 2012 20:39:34 +0000 http://swamplot.com/?p=43734#comment-252676 I "heart" my slumlord. I “heart” my slumlord.

]]> By: ZAW http://swamplot.com/comment-of-the-day-the-shelf-life-of-apartment-complexes/2012-07-03/#comment-252651 ZAW Wed, 04 Jul 2012 18:45:45 +0000 http://swamplot.com/?p=43734#comment-252651 Chris: I think we're talking about two different things. Apartments are built to their markets. There are finishes and features that you'll find in high-end apartments, that you won't find in mid-range or low-end apartments. At the same time, curb appeal is important, so they will make the parts of the building that you can see and touch nicer than the ones that you can only see, which in turn are nicer than the ones you can't see. This is true in single-family housing as well, and has been for 200 years now. . What I'm talking about is this: It's not that difficult to build, and lease, a new apartment complex almost anywhere in the Houston Metro area. All you have to do is make sure the rents are competitive; and make sure it's either the only complex around, or it's as nice or nicer than neighboring complexes. The real test of a complex comes in 15 or 20 years, when the newness has worn off, when the area's built up and there's traffic; when the economy has gone through a boom/bust cycle. If the complex still commands good rents, still attracts good tenants, and still has good occupancy rates - you know they hit it right. If not - the developers screwed up. . The trouble is, by the time we realize they screwed up, the developers are long-gone. So if we live near their mistakes, we sell our homes at a loss, and move far away, hoping that a new crop of apartments doesn't show up in our new neighborhoods. Chris: I think we’re talking about two different things. Apartments are built to their markets. There are finishes and features that you’ll find in high-end apartments, that you won’t find in mid-range or low-end apartments. At the same time, curb appeal is important, so they will make the parts of the building that you can see and touch nicer than the ones that you can only see, which in turn are nicer than the ones you can’t see. This is true in single-family housing as well, and has been for 200 years now.
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What I’m talking about is this: It’s not that difficult to build, and lease, a new apartment complex almost anywhere in the Houston Metro area. All you have to do is make sure the rents are competitive; and make sure it’s either the only complex around, or it’s as nice or nicer than neighboring complexes. The real test of a complex comes in 15 or 20 years, when the newness has worn off, when the area’s built up and there’s traffic; when the economy has gone through a boom/bust cycle. If the complex still commands good rents, still attracts good tenants, and still has good occupancy rates – you know they hit it right. If not – the developers screwed up.
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The trouble is, by the time we realize they screwed up, the developers are long-gone. So if we live near their mistakes, we sell our homes at a loss, and move far away, hoping that a new crop of apartments doesn’t show up in our new neighborhoods.

]]> By: Cody http://swamplot.com/comment-of-the-day-the-shelf-life-of-apartment-complexes/2012-07-03/#comment-252625 Cody Wed, 04 Jul 2012 17:16:24 +0000 http://swamplot.com/?p=43734#comment-252625 Chris: Guess it depends on the market. In Montrose, there is a large mix of quality in the same generation of apartment. Some owners do a lot of upgrades to maximize rent, some are fine keeping upgrades to a minimum and keeping rents low. It allows people that can't afford top-of-the-line to still live in the area. . We try to take a balanced approach. At a point, additional upgrades simply don't provide the same return. But there are often small upgrades that give a large bank for the buck (painting the building/units, adding central air, new flooring, etc.) . While the neighbors would love A+ all over the place, that would drive out a lot of people that couldn't afford A+ rent. I remind myself of this as I drive by "slums" in otherwise nice areas, that the people live there live there because nicer places cost more so they've made an economic choice that's best for THEM. . We're going to buy a building soon in Montrose that's (currently) a total dump. I'm sure in fixing it up the neighbors will be happy, but the people paying $500/month for a 1bd won't be, as financials of making that property nice don't work with $500/month rent. So those people will move on to another 'slum' that people complain about (yet tenants are happy exist) Chris: Guess it depends on the market. In Montrose, there is a large mix of quality in the same generation of apartment. Some owners do a lot of upgrades to maximize rent, some are fine keeping upgrades to a minimum and keeping rents low. It allows people that can’t afford top-of-the-line to still live in the area.
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We try to take a balanced approach. At a point, additional upgrades simply don’t provide the same return. But there are often small upgrades that give a large bank for the buck (painting the building/units, adding central air, new flooring, etc.)
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While the neighbors would love A+ all over the place, that would drive out a lot of people that couldn’t afford A+ rent. I remind myself of this as I drive by “slums” in otherwise nice areas, that the people live there live there because nicer places cost more so they’ve made an economic choice that’s best for THEM.
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We’re going to buy a building soon in Montrose that’s (currently) a total dump. I’m sure in fixing it up the neighbors will be happy, but the people paying $500/month for a 1bd won’t be, as financials of making that property nice don’t work with $500/month rent. So those people will move on to another ‘slum’ that people complain about (yet tenants are happy exist)

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