Step 1: Keep Renting To Students; Keep Pumping the MCIs. Goal 1: Churn apartments and get legal rents sky-high but keep renting at market rates. Goal 2: Force out as many people as possible through the MCIs. Any who vacate for any other reasons are gravy but keep renting to students to keep the churn going in order to raise legal rents.
Step 2: Sell after all lawsuits are settled. Most likely winner: Fortress @ 4.7B.
Step 3: Keep the place rental for about 10 yrs...or whenever real estate has totally recovered and is running high.
Step 4: Keep executing Step 1 to force out tenants and keep raising legal rents.
Step 5: At some point with 70% to 80% of the apartments at market rate, upon lease renewal selectively set many units to legal rent forcing out a huge number of tenants.
Step 6: With so many apartments vacant because they will be unaffordable to most renters at legal rent, convert the place making the insider prices affordable to the few renters remaining (to achieve the 15% needed to meet legal requirements in order to convert.).
Step 7: Sell the vacant units at near market rates. 7000 units @ 2MM = 14B or more. Worth any risks and outlays.
Warehousing apartments is illegal. But charging legal rents is not. So if units are vacant because no one will bite at such high but legal rents, it's not warehousing. Rather it's an opportunity and windfall for the owner provided by the ability to charge for MCIs (needed or not) and the strategy of aggressively renting to students.
Hi,
ReplyDeleteLiquidity tightening is inevitable. Maybe not in the next 6 months but surely by 2016 elections. That, along with the fact that new home sales have been trending down slowly but surely makes it hard to imagine 7000 @ even $1mm is something that would pay out as a business plan. If one can stick it out till mid 2016 then I think time is on our side.
Check my remarks. They say no such action for 10 years. Possibly a little more. Hard to believe real estate will not have more than recovered by then But of course, just this is just a speculation.
DeleteHi,
ReplyDeleteSure just idle fun speculation. My personal view is that in 10 years inflation will be rampant and rates much higher. There won't be much to juice up a housing recovery. If we can hold on to next for 6m to 18m, tenants who are willing to buy as a residence and not as an investment will come out winners. Lets see.
Yes, just speculating of course that there will be no conversion and no opportunity to buy. Just more students, more MCIs, and more of the same.
DeleteThe fact that you don't think there will be a conversion probably means that there will be one for sure. Sentiment has definitely shifted to your world view, and that can only mean the opposite will materialize. The only question is whether or not it will be a good deal for long term tenants.
ReplyDelete