Pittsburgh—Joe Caro had been looking for a place to develop a project for about two years. He searched up and down the East Coast, from Maine to Key West, looking for the right opportunity.
He had three criteria in mind: The location needed to be a major city, close to the beach, and in a hip and happening neighborhood.
Pittsburgh wasn’t in his plans, but Caro thought he would check it out anyway. “It was out of curiosity, and it would let me cross it off my list,” he said.
Fast forward to today: Caro has not only found his apartment project, he is calling the Steel City home.
The self-confessed New York snob gushes about Pittsburgh. His firm, Urban Ever-Green, paid about $495,000 for two office buildings last year. One is eight stories, and it is attached to a four-story building that dates back to the 1920s. Caro plans to create about 12 apartments inside, with retail and office on the first two levels. He expects to spend roughly $250,000 on the renovation and hopes residents can move in this summer.
The value, he said, is something he couldn’t get in New York.
“It’s smack in the middle of the city, with colleges, theater, and shopping nearby,” Caro said.
The clincher was the friendly people, however. “You smile at someone, and they smile right back,” Caro said, noting that’s not always the case in other big cities.
His plans call for creating modern lofts, with monthly rents starting at about $1,200.
Caro didn’t get the beach that he wanted, but he’s not complaining. “I have three rivers around me,” he said.
The Cork gets its pop back
Located along the Allegheny River, The Cork Factory is changing the Strip District of Pittsburgh.
All 297 units were delivered in March 2007, and the development was 85 percent leased at the start of February.
The project has tripled the number of living units in this colorful neighborhood, which features a lively mix of produce markets, clubs, and galleries.
“It [The Cork Factory] is the start of change,” said Rainbow Russell, director of residential management for Chicago-based developer McCaffery Interests, Inc., noting that more new development is following.
Formerly home to the Armstrong Cork Co., the historic building had been abandoned for more than 30 years when Robert Beynon, owner of a real estate firm, and Charles Hammel III, president of a trucking business, bought the property in 1996. The redevelopment of the property finally took off around 2005 when the owners joined forces with the McCaffery firm.
The $60 million project features one-, two-, and three-bedroom loft units. Monthly rents range from about $1,100 to $3,500. Retail tenants at The Cork Factory include an upscale grocer and an Italian restaurant.
Developers maintained much of the original structure, including the brick walls. They even turned some of the graffiti on the walls into art pieces. A restored engine room is used for community gatherings.
A number of residents are people who grew up in Pittsburgh, moved away, and have come back to the city, said Russell. “They wanted this urban lifestyle,” she said.
Russell can tell that the project has created a buzz in the community. When you get in a cab and ask for The Cork Factory, there’s a good chance that the driver knows just where to go, she said.
The Pittsburgh region hasn’t had a lot of multifamily development over the years. One reason is because single-family homes are still affordable, said Jeff Burd, president of Tall Timber Group, a local construction market research firm.
The metro area was the 45th most affordable region in the country in the third quarter of 2007, according to the National Association of Home Builders/Wells Fargo Housing Opportunity Index, which ranked more than 200 metros. More than 72 percent of the homes sold that quarter were affordable to families earning the area median income.
The biggest trend in Pittsburgh is the emergence of New Urbanism, a design movement that promotes walkable, neighborhood-based development, Burd said.
In the two-square-mile central core of Pittsburgh, there are approximately 8,500 residents and 5,700 residential units. Close to 4,000 of those residents live in the downtown district known as the Golden Triangle.
More development on the way
Roughly $3 billion of investment is in the pipeline for the central core, with about $720 million of that associated with residential projects, said Patricia Burk, vice president of housing and economic development for the Pittsburgh Downtown Partnership. That represents about 2,200 new market-rate housing units coming to the core in the next several years.
The average occupancy in downtown was about 95 percent in the fourth quarter of 2007, and the average market rent per square foot was $1.47, according to the group.
The partnership has had three main goals related to housing. It wants to enhance interest in living downtown; improve the area’s livability by pushing for amenities like grocers, dog parks, and public transportation; and make development in the area easier, said Burk.
To help developers, the group will unveil a new gap financing program this year that will provide developers with loans at attractive terms for their downtown projects. Interest rates will be “commercially reasonable,” and terms will be flexible, Burk said. Loan amounts will be up to $500,000 or $70,000 per unit, whichever is less.
It wouldn’t surprise Caro if other developers soon discover the city.
“I’m pretty well traveled,” he said. “And, Pittsburgh, in my judgment, is poised for a major boom. It’s undiscovered and undervalued.”