Thank you for sharing!

Your article was successfully shared with the contacts you provided.

(To read more on the multifamily market, click here.)

BOYNTON BEACH, FL-With rising insurance rates driving up operating costs of multifamily properties, some owners are having difficulty operating properties. This has led to a rise in the prevalence of foreclosures and distressed properties, and an increased interest in property management as a way to address these problems, said Dennis Lee, principal and executive vice president of the locally based Apogee Cos.

“Over the past year we’ve done a lot of work with property owners with malfunctioning assets,” Lee tells GlobeSt.com. “Home prices have reached an all-time high, which has put pressure on the multifamily market to fill the gap.”

The active hurricane seasons of 2004 and 2005 have caused, in some cases, property insurance rates to triple. This has led to rising operating costs, which owners cannot fully offset with increased rental rates. This is particularly true with affordable housing, with rents that are capped at levels to maintain affordability. “It becomes a vicious cycle,” Lee says. “The physical asset starts to deteriorate and you cannot get the rental rates increases needed to begin to turn the property around.”

When this begins to happen, property may begin to accept less than desirable tenants and the reputation of a property “can go south quickly.” It may also result in a property being forced to convert from affordable to market-rate housing.

Lee gave as an example a property owner in Western Florida that Apogee is currently assisting through bankruptcy of a 360-unit affordable housing property. The insurance rates more than tripled, which caused the property to go into foreclosure. “When the property is sold, it will no longer be affordable housing,” Lee says. “The new owners will have to raise rents $200 to $400 a month to operate the property.”

To address these issues, there are steps that owners can take. When Apogee intervenes, the first steps it often takes are cleaning up the tenant profile by issuing rent collection letters and evicting tenants that do not pay. “In 60 to 90 days, you can turn the corner on a property,” he says.

Other measures include hiring an engineer to assess property “to give it a clean bill of health.” Owners can also install modern alarm systems and other loss prevention methods, which will insurance companies will compensate in the way of discounts on insurance rates. “On the affordable housing side, there may be some types of subsidies available,” Lee says.

Want to continue reading?
Become a Free ALM Digital Reader.

Once you are an ALM digital member, you’ll receive:

  • Unlimited access to GlobeSt and other free ALM publications
  • Access to 15 years of GlobeSt archives
  • Your choice of GlobeSt digital newsletters and over 70 others from popular sister publications
  • 1 free article* every 30 days across the ALM subscription network
  • Exclusive discounts on ALM events and publications

*May exclude premium content
Already have an account?


Join 1000+ of the industry's top owners, investors, developers, brokers & financiers at THE MULTIFAMILY EVENT OF THE YEAR!

Get More Information


Join GlobeSt

Don't miss crucial news and insights you need to make informed commercial real estate decisions. Join GlobeSt.com now!

  • Free unlimited access to GlobeSt.com's trusted and independent team of experts who provide commercial real estate owners, investors, developers, brokers and finance professionals with comprehensive coverage, analysis and best practices necessary to innovate and build business.
  • Exclusive discounts on ALM and GlobeSt events.
  • Access to other award-winning ALM websites including ThinkAdvisor.com and Law.com.

Already have an account? Sign In Now
Join GlobeSt

Copyright © 2021 ALM Media Properties, LLC. All Rights Reserved.