Ed Pettinella, CEO and president of Home Properties, Inc. (NYSE: HME), joined REIT.com for a CEO Spotlight video interview in Chicago at REITWeek 2013: NAREIT’s Investor Forum.
Home Properties owns approximately 42,000 units in 119 apartment communities primarily in close-in suburban markets of major cities along the east coast.
Pettinella spoke about the impact of a recovering single-family housing market on the apartment industry.
“For us, the single-family market is not having that much of an impact. First, you have to keep in mind that 60 percent of our residents either never owned a home or have intentions of owning a home. It’s the other 40 percent that we’re really talking about,” he said.
However, he said two things are creating barriers for that 40 percent, including the banking system, which is making it difficult for first time homebuyers to quality for a mortgage.
“We have the lowest turnover ratio in the industry: 30 percent versus an industry average of 55 percent. We’re near record high occupancy of around 96 percent for our company,” he said. “At this point rental rates and occupancy do not seem to be adversely affected by the parallel single-family market, which is going strong.”
Pettinella also described the mood at the June REITWeek conference as “relatively upbeat.” He attributed this to a number of factors, including more opportunities in the apartment sector and strong fundamentals.
“I think the ability to raise rents is still there. The unemployment level, although it’s not in a great place now, is getting better, and the economic condition for the country is looking much better. The propensity to do well in the sector is there,” he said.
Additionally, the apartment REIT has changed its geographic footprint and changed technology to give it a better competitive advantage. That has played a role in the company’s performance during this market cycle, according to Pettinella.
“Now, we’re not only performing well in a Great Recession, which we did very well, but we seem to be holding up extremely well in the up markets going forward,” he said.