On a prime piece of real estate along the Schuylkill River in Philadelphia, local developer Realen Properties originally had plans to build a five-story apartment project that would require steel construction. Concerns about budget and financing compelled the developer to ask its design firm Cope Linder Architects to rework the project with wood-frame construction.
David Ertz, partner at Philadelphia-based Cope Linder Architects, shortened and deepened the project so it wouldn’t lose any units. The final product is the 205-unit Waterford, a four-story rental property with ground-floor parking and mezzanine lofts.
Realen Properties isn’t the only developer worried about project costs today. With lenders hesitant to finance projects with big construction budgets, many developers are focusing their energy on one- to four-story low-rises because high-rise and mid-rise projects are typically the most expensive product to build. Low-rise product—with its smaller price tag—requires less equity and is easier to finance.
Developers are building and planning low-rise projects in a variety of locales, from downtown Philly to suburban Houston. The projects range from garden-style communities spread across several acres to compact urban buildings on infill tracts. While the setting heavily influences the look and feel of these projects, here are three design tips to keep in mind to ensure your next low-rise development stands out for all the right reasons.
1. Think Density.
As developers buy smaller pieces of land and build fewer units, they’re pushing the envelope when it comes to density. By increasing density, developers can maximize their revenues and use land more efficiently, says Rohit Anand, managing partner of residential for Cubellis, a Boston-based design and engineering firm.
Dallas-based Humphreys & Partners Architects recently introduced a design scheme that eliminates hallways, making it 87 percent more efficient than traditional hallway-centric properties, says CEO Mark Humphreys. The four-story design scheme, dubbed eMax(SD), reallocates roughly 50,000 square feet of wasted hallway space into more units. The financial savings are huge. For example, if the construction costs tally $100 per square foot and a developer shaves off 50,000 square feet, that totals $5 million in savings.
Humphreys designed eMax to appeal to an emerging renter group—the 80 million Echo Boomers. “Echo Boomers want to be in a cool urban area, but they can’t afford the rent,” Humphreys says. “Everybody has been focused on luxury units in urban areas, and the affordable projects are missing.”
Humphreys says eMax is not just a solution for Echo Boomers but also for workforce housing, particularly in markets where market-rate apartments are well-beyond the reach of service workers. With an average unit size of less than 700 square feet (units start at 340 square feet), eMax allows developers to push density to 70 units per acre.
2. Don’t Skimp on Amenities.
Just because renters might be paying less doesn’t mean they expect fewer bells and whistles. Amenities in low-rise multifamily properties have evolved significantly over the past decade. While renters were previously satisfied with pools and fitness centers, they’re looking for more places to interact. Clubhouses now include demonstration kitchens, wine tasting bars, billiards and poker tables, movie screens, and outdoor gathering spaces. In recent years, developers also have added Internet cafés and business centers.
While renters want all of these cool amenities, space at denser, low-rise properties is at a premium. Therefore, architects are moving away from single-use spaces and designing spaces that can be used for a variety of events. In Philadelphia, for example, Realen Properties’ 205-unit Waterford will feature a clubhouse that mimics a hotel lobby. The shared clubhouse/lobby space will include a lounge area with Wi-Fi and a café bar.
Public/private partnerships also are a big trend. Urban low-rise properties can reach out to the surrounding community by incorporating shared outdoor spaces, says Eric Brock, a principal with Lord, Aeck & Sargent, an Atlanta-based architecture firm that designed Glenwood East, a 236-unit high-end apartment property developed by Alliance Residential Co. Brock designed a park at Glenwood East’s entrance to integrate into the streetscape as a “true public gesture,” Brock says.
3. Put Safety First.
Yet the trend toward more shared space means that people who don’t have any business hanging around the property might be able to do so—making safety an even greater concern and challenge for architects and planners.
In Memphis, for example, architect David Scheurmann is working on a Hope VI project with the Memphis Housing Authority and St. Louis-based developer McCormack Baron Salazar that combines both open space and safety elements. His firm, Memphis-based Architecture, designed the 450-unit University Place as one of the first Hope VI projects to achieve LEED certification from the U.S. Green Building Council. University Place is not a gated community—rather, an iron picket fence secures each building’s parking area and tot lot. Moreover, the building corridors are secured by front entry doors with security phones.
“The open breezeway and corridor style doesn’t feel very safe to many residents, especially women,” adds Humphreys of Humphreys & Partners. That’s why his firm is focused on designing low-rise properties with attached garages. In suburban Houston, for example, the firm designed Newport on the Lake, a 201-unit project that is 95 percent leased only 12 months after opening. Fifty percent of the units feature attached garages, and those units are 100 percent leased, Humphreys says. “Garages make people feel more secure,” he contends.
Jennifer Popovec is a freelance writer living in Fort Worth, Texas.
Show me the Money
HUD fills the construction lending void.
David Spetrino Jr. has a vision for the riverfront in downtown Wilmington, N.C. He’s bought the land and obtained entitlements from the city to build a mixed-use project. But he can’t find the one thing he needs to move forward—a construction loan.
As principal of Wilmington, N.C.-based Plantation Building Corp., Spetrino has a 10-year track record developing urban infill projects. Previously, he relied on local banks to fund his projects, but those same banks have either gone belly up or have shut down their real estate lending programs. Unfortunately, Spetrino is just one of hundreds, if not thousands, of multifamily developers who can’t find the financing they need to build their projects.
David Hendrickson, managing director of real estate investment banking for Jones Lang LaSalle, says a handful of local and community banks are still willing to provide construction loans for rental housing, but they now require borrowers to put in 25 percent to 40 percent equity. Moreover, banks are no longer offering non-recourse loans, and loan proceeds rarely exceed $15 million.
Developers looking to build larger projects really have only one source of capital—HUD. Developers are applying for HUD 221(d)(4) loans, which can be used to construct low-to mid-rise rental housing product.
HUD 221(d)(4) loans cover 90 percent of the project’s loan-to-cost and have no minimum or maximum threshold for total project cost. They are 36-month interest-only construction loans that automatically convert into 40-year self-amortizing permanent loans, says Curtis Palmer, managing director of Multi-Housing Capital Advisors, a Los Angeles-based brokerage firm.
The interest rate for these loans is based on 10-year Treasuries and currently ranges from the mid- to high- 5 percent, Palmer adds. And, even though the program was initially created to provide low-income to market-rate housing in underserved areas, it often funds projects that don’t fit into that narrow definition.
“If you own a piece of land that is developable today, and you don’t have the balance sheet to sign a recourse loan, HUD 221(d)(4) loans are the only way to go,” Palmer says.
But applying for and obtaining a HUD loan is rather difficult. On average, the loan process takes six to 10 months, and there are specific application requirements and hurdles that most “developers would not be used to,” Hendrickson says.