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As Apartment Demand Grows, GSE Reform, Jobs Remain Concerns - BRE's Connie Moore on Rental Market

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Published on Mar 8, 2011

http://www.reit.com Government proposals to reform Fannie Mae and Freddie Mac have been hot topics in the single-family and residential housing industries. BRE Properties, Inc. (NYSE: BRE) President and CEO Constance B. Moore, speaking at the start of NAREIT's Washington Leadership Forum, said her hope is that regulators factor in apartments as they embark on reform.

"While apartments are a very small component of Fannie and Freddie's portfolio, it has been a very profitable one," Moore said.

In addition, Moore said apartments represent a critical component of the housing puzzle going forward, either by choice or by necessity. She added that many REITs, including BRE, tend to use the unsecured market as opposed to Fannie and Freddie on an ongoing basis. However, she said when they sell properties the GSEs provide liquidity on the other side.

On the demand side, Moore said there are 78 million Echo Boomers entering the renter pool at a time when new supply is limited.

"Our ability to have pricing power is very market specific," Moore said.

Market fundamentals also play a factor in BRE acquisition and disposition strategy. On the acquisition side, BRE is focusing on areas where it can concentrate its capital. "We tend to look 50 miles off the coast from San Francisco down to San Diego where we already have capital so we can get efficiencies," Moore said.

She said it is a challenging market for acquisitions, which is why BRE has shifted some of its focus back to development.

As it relates to selling assets, Moore said BRE only has one non-core market, east of Interstate 15 in the Inland Empire. She said they sold three assets there last year and have three remaining.

While there are numerous positive factors bolstering the apartment sector, Moore said job creation continues to be a challenge. The key is not just new jobs, but quality jobs with higher wages, she said.

"During this recessionary environment we had about 23 percent of the jobs that were lost in low wage earning positions, but 50 percent of the increase has been in those positions," she said. "We are seeing jobs coming back but at lower wages and that limits are ability to push rents."

By Matt Bechard

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