Like many multifamily developers, Denver-based Archstone sees opportunity in Texas. To help capitalize on those possibilities, the firm recently promoted Jay Curran (previously with Atlanta-based Novare) to vice president of development for Texas. He took some time recently to chat with Multifamily Executive senior editor Les Shaver.
MFE: What’s the opportunity in Texas right now?
CURRAN: We see opportunities for multifamily development in certain locations in Texas. There's been a big shift in the supply–demand dynamic. The spigot got turned off in 2008 and 2009. Particularly in Texas, there’s been a good increase in demand for multi housing. There’s been very little new product coming on, particularly in the past 12 months. We are very bullish on Texas, but also very selective in where we will develop.
MFE: What's the difference going from developing condos at Novare to rental apartments at Archstone
CURRAN: It’s not hugely different. The product we build at Archstone is a nice product that people want to stay in for an extended period of time, in a lot of cases. Our focus at Archstone is to build in areas with high demand for housing because of the proximity to work and urban amenities. Often, what we’re building at Archstone is not dissimilar to what I did before [at Novare].
MFE: What challenges are you seeing with the debt and equity markets?
CURRAN: They’re still very cautious in terms of investing and very selective with respect to the companies they will finance, focusing on high-quality product in the best locations. In terms of debt and equity, I think that securing the dollars, the investors or lenders are much more attentive to the details than they might have been in the past. In a lot of ways, it’s good for firms like Archstone because they [equity and debt] want people who have extensive experience doing this and have a thoughtful approach to development. That’s what we’re focused on.
It’s still tough and it’s a long process to close financing for new construction, but it benefits us in some ways because our opportunities are getting attention from lenders and equity providers who do have interest in being part of multifamily. Plus, Archstone has a great reputation both as a company and for the product we develop. It certainly makes raising debt and equity easier.
MFE: How much ground has the conventional financing market returned in the past six months?
CURRAN: It’s a little bit of a slow wrap-up, but it's certainly coming back. There are more lenders. At one point, it seemed like there were no private lenders interested in development. But there now are certainly more options for debt and equity for multifamily development.
MFE: Archstone used the Sec. 221(d)(4) program in the past couple of years. Are you still using FHA, or are you going the conventional route?
CURRAN: We worked with Wells Fargo and Cross Harbor for the financing on Braeswood [a project at an intersection of North Braeswood Boulevard in Houston]. We did FHA deals in Washington, D.C. That was a learning experience for us. We had a couple of very good sites in that metro area. There’s obviously very good demand for multifamily housing. At a time when there wasn’t much new development taking place, we were fortunate that HUD recognized the need and was able to help us get deals done.
MFE: We’re seeing a lot of announcements from private developers breaking ground in Texas. Does that concern you?
CURRAN: What you’re finding is there’s more attention being paid to the developments that are actually taking place. There is still a ways to go before we come back to the development levels we had in the mid-2000s. You just have more attention being paid when someone does break ground. You’ve had population growth and job growth in Texas, while a lot of other markets around the country just haven’t had as much. Additionally, even in markets not generally thought of as high-barrier-to-entry markets, we are very selective in choosing sites and look in areas where it is difficult for competition to flood the market with new product.
MFE: What are you seeing with construction costs?
CURRAN: On construction costs, there’s still some concern about what’s happening with material costs. Labor costs are relatively reasonable compared to where we were a few years ago. We’re finding that there’s sufficient demand to make things happen right now. The world is a volatile place right now, so we don’t know exactly where things are going, but the economics are good for getting deals right now.