I know everyone has been watching the national news and all the unsettling events of the past week (government takeovers of mortgage giants FNMA and Freddie Mac, as well as the HUGE bankruptcy filing of Lehman Brothers). I was in Washington, DC on Monday and Tuesday of this week with the National Multi-Housing Council. We listened to executives from FNMA & Freddie and several of the CEO’s of the largest apartment operators in the country. Without exception, all of these executives are concerned about a prolonged economic slowdown. But, for now, the apartment industry is doing well. When you think about it, a slower economy means fewer people being able to buy homes and therefore, more people renting (increased demand). In addition, a temporary slowdown means less construction of new rental units (slow or no increase in supply). Both these factors are good for our industry…at least in the short term.

This is consistent with what we have been seeing in the markets our company operates in, particularly Lubbock. Our rental markets are for the most part STRONGER than they were a year ago. The fundamentals of our industry are strong. These messages were echoed by my collegues doing business across the country.

So to our employees and associates across the State of Texas, don’t worry about what you hear in the national news. Stay focused on your individual property and your residents. Keep your customers happy and our business will be just fine through the tough economic times our country no doubt faces in the coming months.

The Lubbock A-J had an article in today’s newspaper indicating once again that the Lubbock economy is doing better than the state and national economies. It is good reading. See the link below.

Lubbock’s economy holds firm
By Enrique Rangel | A-J AUSTIN BUREAU
Wednesday, September 24, 2008
Story last updated at 9/24/2008 - 1:37 am

http://lubbockonline.com/stories/092408/loc_336129404.shtml

The National Multi Housing Council (”NMHC”) released its “NMHC Market Trends” report earlier today.    The report states in part “In the second quarter of 2008, apartment vacancy rates increased. The U.S. Census Bureau vacancy rate for all rental apartments (in buildings with 5 or more units) increased to 11.1 percent, up 0.4 percent from the previous quarter and one percent point from a year earlier. This is the highest vacancy rate since the first quarter of 2005.” 

While the national trend is declining occupancy, Lubbock’s occupancy is improving.  In its semi-annual survey dated June 2008, the Lubbock Apartment Association reports an occupancy increase of 4.09% from June 2007 to June 2008.   This is the highest summertime occupancy since 2002.

I believe there are two significant reasons for this.  First, the Lubbock market is continuing to absorb new construction that has come online since 2003 while the rate of new construction has slowed.  Second, the national mortgage crisis has resulted in tightened credit standards for new homebuyers.  This has the effect of keeping people in rental housing that might have otherwise bought homes within the last year.

It goes without saying that the continued growth and success of Texas Tech plays a large part in the overall Lubbock apartment occupancy as well.  But when combined with these other factors, Lubbock continues to buck the national trend which is one of the many reasons The McDougal Companies love calling Lubbock home.

Photo by Buffalo Framing & Truss

Construction of the Centre’s sister property, The Suites at Overton Park, is seen in this aerial photo provided by one of our business partners.    Leasing began this month for occupancy in early 2009.    This property will primarly house Texas Tech students in 298 apartments with just over 450 bedrooms.   The continued growth of Texas Tech is important for the Lubbock economy and McDougal Companies takes pride in assisting Tech students with their housing needs.

McDougal Companies is working to keep property taxes low for homeowners and rental properties affordable.    Following is an excerpt from testimony by Mike McDougal on Tuesday, August 12, before the Texas House Select Committee on Property Tax Relief and Appraisal Reform.   We would like to hear your comments and ideas.

Property taxes and appraisal reform are priority legislative issues for our company and our many business partners across the state.   We appreciate the efforts the Texas Legislature has made in recent years to lower property tax rates, but rate reductions without appraisal reforms HAVE NOT produced lower property tax bills.    The appraisal process is broken and as a result untold amounts of time and financial resources are being expended that bring no net economic benefit to the state, our company, nor our customers. 

One of the significant problems caused by the wide variations in appraisals for a specific property from one year to the next is that our business, particularly the apartment properties, are subject to long-term leases with no provisions for pass through of tax increases.  In fact, sometimes the market will bear ZERO rent increase regardless of cost differentials.    When property taxes increase 45% due to a reassessment from the district, there is no way these properties can increase rents in a similar amount.        Residential rent is market driven and unlike commercial triple-net leases in which any changes in property taxes are automatically passed on to the tenants, residential leases don’t have such a provision and are absorbed by the owner unless the market allows for a rental increase….but then only at the expiration of the lease.

During the last legislative session, our company and industry supported a proposal that would have created a 5-year rolling average for appraisals.   This concept would, at least, provide some predictability for both taxing entities and property owners.    A 5-year rolling average would effectively cover up a lot of “sins” within the broken appraisal system.    If, or I should say when, a property is mis-valued (either high or low),  the property owner would have 5 years to plan for the change in taxes before the full impact hits his bottom line.    This same predictability would also benefit taxing authorities as it would smooth out the ups and downs of tax collections just because properties increased or decreased in value during one particular year.

Bottom line, we believe the implementation of a simple 5-year average on appraisal value used to assess taxes would provide predictability and create a more stable economic environment for real estate across the State of Texas.

The McDougal Companies continue to see progress in the Overton Park addition of Lubbock.   The pictures below show the construction progress on The Hotel at Overton Park, a 15-story luxury hotel & conference center scheduled to open mid-2009.     Also shown under construction is The Suites at Overton Park, a 4-story, 298 unit apartment complex offering same level structured parking for each resident.   This project will be completed Spring 2009.

(click on a photo to view a larger image)

Photos by Warren Warner
Lubbock Economic Development Alliance
June 2008

Welcome to McBlog. We invite comments from our residents, real estate clients, construction customers and all others with something to share about our company. We strive to respond to all comments and posts within 24 hours. Comments and posts in poor taste will either be edited or deleted at our discretion. But we do encourage constructive criticism and positive comments as each blogger deems appropriate.

We look forward to engaging you in a conversation.
Mike McDougal, President, McDougal Properties.

Posts are monitored and replied to by Dudley, our company mascot. He sleeps about 23 hours per day, so be patient, he will get to you when his schedule allows.

We are a family business in more ways than one. Ours is a company owned and operated by the McDougal family. It is a family of companies devoted to providing quality housing and it is a group of employees who see themselves as a family.

Our mission We strive to be the best in the housing industry by aspiring to the highest standard of service in a unique and friendly atmosphere.

Our values We are a family operated group of businesses that incorporates concerns for community, family, customer satisfaction, integrity and quality.

Our purpose We provide our customers with the highest quality of service in construction, housing and real estate.

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McDougal Properties has grown from one apartment community to a diversified property management company. Rental properties comprise the largest portion of the company’s business. McDougal’s multifamily division employs a management team that oversees more than 3 million square feet of rental housing! Customer service is and always has been the number one objective of McDougal Properties. Come explore why we’re bringing better living to you!