It? been a tough start to the year for Orange County? apartment owners and investors. But the slump has been a boon for the local sign-twirling industry.
Rents were down at the area? largest apartment complexes by nearly 2% at the end of the first quarter compared to a year earlier, to an average monthly rent of about $1,500, according to the Casden Real Estate Eco-nomics forecast from the University of Southern California.
It? the first time rents have fallen here in more than a decade, according to Casden? research.
Until this year, OC? apartment owners had been seeing annual rent increases of 6% to 8% for most of the past decade.
The drops for some larger properties are more pronounced than that?n particular for the newest projects coming on line in the county.
Drive around Irvine or Anaheim on a weekend and you?e likely to see plenty of sign-twirlers advertising free rent and other concessions for the area? largest buildings, many of which opened their doors in the past few years.
Landlords are offering bigger deals to strike leases these days.
Virginia-based real estate investment trust AvalonBay Communities Inc. said it has dropped monthly lease rates by an average of $200 during the past quarter for its new Anaheim Stadium project in the Platinum Triangle.
Monthly rents at the AvalonBay complex run from about $1,500 to more than $2,400. Discounts for its most expensive units can total $6,500 a year, the company says on its Web site.
Elsewhere in the Platinum Triangle, Colorado developer Archstone is advertising up to two months free rent for its 884-unit Archstone Gateway complex in the Platinum Triangle, which opened late last year.
Other new complexes in Irvine and Costa Mesa are touting six weeks to two months of free rent for their apartments. A year ago, few if any big developers were offering those types of incentives.
Some of the extra street advertising seen these days likely is a function of the market, market watchers say.
The period between Easter and Labor Day typically is the main leasing season for area apartment owners. The added marketing most likely is being used to capture the seasonal traffic, said Thomas Shelton, the president of Western National Property Manage-ment, the apartment management arm of Irvine? Western National Group.
?t? a more challenging market now, no question,?Shelton said. ?here? definitely some downward pressure on rents.?
Late last year Western National?C? second-largest owner of apartments?rojected that its rents here would largely remain flat for 2009.
That conservative estimate has largely proven true, according to Shelton, although the company?ike most others in the industry?s surprised that there? been little signs of stabilization in the market, let alone a turnaround.
?his has been a little deeper than people expected a year ago,?Shelton said.
Right now Western National, which hasn? made an acquisition since 2006 and only has one project under development, is trying ?o keep our heads down?and avoid the troubles facing other owners, Shelton said.
Western National has only seen a 1% drop in occupancy in the past year for its portfolio. It now counts about a 7% vacancy rate, he said.
Other developers and investors have seen their fair share of issues.
In one of the country? most high-profile collapses of a big apartment investor recently, Irvine-based Bethany Group LLC saw the bulk of its portfolio, which counts close to 15,000 units, fall into bankruptcy.
More than 50 complexes owned by Beth-any have now reportedly filed for Chapter 11 bankruptcy protection across the country after Bethany? lenders cut off funding to the projects.
Filings for about 25 of the company? complexes were made in Santa Ana? bankruptcy court.
In some cases, the cut-off in funding resulted in Bethany? properties falling into turmoil?mployees not being paid for weeks, trash accumulating, utilities being shut off and tenants falling into confusion?ccording to local reports.
Bankruptcies
OC? seen other locally based apartment owners turn to bankruptcy in recent years.
Smaller filings since late 2007 include those for Atherton-Newport Investments LLC and Real Estate Partners Inc., both of Irvine.
The Real Estate Partners case, which is still ongoing, was presaged by a federal fraud investigation. In late 2007, Real Estate Partners and its president, Dawson Daven-port, were among several parties the Securi-ties and Exchange Commission charged with conducting a $50 million real estate fraud scheme.
The SEC says that Real Estate Partners ran a Ponzi-like scheme, where investors were promised huge returns for their investments, which instead were largely used to pay commissions and other investors.
In the latest twist to that episode, Daven-port last month personally filed for Chapter 11 bankruptcy protection in Santa Ana. His petition listed between $1 million to $10 million of both assets and liabilities.
