Fannie Mae launched their Energy Star program for apartment building investors by releasing their study on utility use. The report, called Transforming Multifamily Housing: Fannie Mae’s Green Initiative and ENERGY STAR for Multifamily (PDF). It’s loaded with great info on reducing energy and water use as well as stats on use broken up by unit, square foot and region. They also talk about their Green Preservation Plus loans which combined with certified Green Buildings they have financed $130 million in loans on as of Q1 2014. But let’s cut to the chase, key findings [Emphasis mine]:
- On average, a 100,000 square foot property spends $125,000 on energy and $33,000 on water annually.
- If this property saved 15% on energy and water costs, it would increase asset value by almost $400,000, at a 6% cap rate.
- The least efficient properties use over three times as much energy and six times as much water per square foot as the most efficient properties.
- When owners paid for all energy costs, median annual energy use was 26% higher than when tenants paid for them.
- High-rise properties use almost 10% more energy per square foot than low-rise properties
- Properties in the West use almost 50% more water per square foot compared to properties in the Northeast.
Clearly reducing common area utility costs and getting tenants to pay for their own use are the two of the best ways to improve Net Operating Income (NOI) and they have a nice graphic showing just how to do that:
It’s an interesting finding that buildings in the West use Continue reading Increase NOI at Your Apartment Building with Fannie Mae’s Energy Star Findings
ALB Commercial Capital has a nice guide for small balance (<$5 million) apartment building investment loans. In it they cover the three most important ratios investors have to clear in order to get a deal funded:
- Loan-To-Value Ratio (LTV) = Total loan balances (1st mtg + 2nd mtg) / Fair market value (as determined by appraisal). For Multifamily mortgages, LTVs seldom exceed 80%.
- Debt Service Coverage Ratio (DSCR, aka DCR, DSR) = Net Operating Income / Debt Service. Most lenders insist that this ratio exceed 1.2 with a few a allowing 1.15.
- Personal Debt Coverage Ratio (PDCR) = Monthly Personal Debt / Monthly Personal Income. The Personal Debt Ratio compares the amount of bills that the borrower must pay each month to the amount of income they earn. Personal Debt Ratios seldom are allowed to exceed 50% in practice.
In addition the guide covers other items that need to be addressed such as Continue reading The 3 Most Important Things You Need To Get an Apartment Building Investment Loan
My Exec Sum: Seattle apartment building investment results from Essex Property Trust Q1 call:
- Seattle demonstrated exceptional same-store NOI and revenue growth of 11.2% driven by very limited supplies of housing and job growth that exceeds national averages
- On operating expenses we expect a 2.3% increase for the second quarter ’12 over the second quarter in ’11
- Seattle rents were up 6.5% compared to the first quarter of 2011. So depending on the submarket, we are now 4% below to even with our prior rent peaks.
- renewal offers for June and July averaged +6% to 8% in Seattle
- As of April 30, its occupancy was 96.1% with a net availability of 5.1%.
- We view this turnover activity (50-55% YoY) as healthy because it provides us with more opportunity to grow rents. Additionally, we only saw a nominal increase in move-outs due to home purchases and affordability.
- Cap rates continue Continue reading Essex Prop. Trust on Seattle Apartment Building Investment: rents up 6.5%, NOI +11% but 10k new units coming