Merging a supermarket with residential is one of the most challenging development combinations, but developers can't get enough of the latest mixed-use trend: anchoring communities with massive grocery stores.
The combination is a natural fit for today's urban dweller, who wants convenience and is willing to pay for it. "It's like having your pantry downstairs," says Tom Baum, president of Greenbelt, Md.-based Bozzuto Development Co. "You've got everything that you would want to purchase right underneath your building, and it creates the ultimate in convenience for the urban lifestyle." Bozzuto is joining the craze with the Delancey, a 241-unit rental community in Arlington, Va., to include a 28,000-square-foot Harris Teeter on the ground floor of one of its three buildings.
Urban grocery stores are in high demand, as revitalized downtown areas flourish with new housing opportunities. "As residential comes back downtown, the retail is now following us," says Baum. Twelve of the 59 stores in the pipeline for Whole Foods Market, an Austin, Texas-based grocery chain that specializes in organic and natural foods, are planned for mixed-use developments in Seattle, New York, Washington, D.C., San Francisco, and Chicago, according to The Wall Street Journal. (Whole Foods declined an interview with MFE, citing a policy of not talking to business-to-business publications.)
While a grocery store like Whole Foods is a major draw for residents, it poses a number of challenges for developers. "There's a lot of waste, so you have to be worried about odor, insects, and vermin," says Fred Harris, senior vice president, development at AvalonBay Communities, which is building Avalon Chrystie Place, a 361-unit luxury rental community that will feature Manhattan's largest Whole Foods: an 85,000-square-foot store. To minimize smells, the grocery store will house a large refrigerated garbage storage area.
Plus, a grocery store needs to have an extremely strong infrastructure to support its tremendous amount of mechanical equipment. "You've got to work from the bottom up," says Marvin H. Meltzer, vice president of New York City-based Meltzer/Mandl Architects. "Clearly the supermarket drives the whole thing."
His firm recently designed Bradhurst Court, a 128-unit affordable housing complex in Harlem atop a 45,000-square-foot Pathmark, a grocery store chain with a quarter of its stores in inner-city locations. "All their stores are standardized based upon being a free-standing structure," says Meltzer. "So when you have all this stuff on top of it, it really poses quite a few problems." To lighten the load and provide more design flexibility for the supermarket, the architect switched from a load-bearing wall on top of a steel frame to a structural steel frame throughout.
Another big issue: making sure grocery operations, such as deliveries, don't interfere with the residents. "It's all about presentation so the environment is equally positive for the retail consumer as it for the resident," says Jim Butz, president of JPI East, which is building Jenkins Row–a large mixed-use project in Washington, D.C.'s Capitol Hill area to include 247 luxury condo units and a 47,000-square-foot grocery store. The project was carefully crafted to separate the grocery store from the housing area, and the loading dock has a fully retractable door. Plus, residents have their own designated parking area.
Despite these challenges, developers are anxious to incorporate grocery stores in their communities. In addition to attracting residents, groceries are a smart way to win over neighbors and politicians. Construction can be a messy process," says Butz. "So while the building is under construction, people will be more understanding because they know they've got something to look forward to." Bring on the prepared meals.
–Rachel Z. Azoff
Hard Times
Domestic abuse victims often lose their apartments. When Quinn Bouley called the police after her husband Daniel Swedo attacked her in their St. Albans, Vt., apartment, she had little idea it would lead to a legal battle that would pit her against her landlord. She just wanted to be safe.
But three days after the incident, her landlord, Jacqueline Young-Sabourin, visited Bouley, telling her that Christianity would help her solve her marital problems, according to court documents. After Bouley rebuffed the theory, Young-Sabourin informed the resident by letter that she had to leave within 30 days. Eventually, the ACLU stepped in and prevented the eviction, but Bouley remained in her apartment under constant watch, with her landlord reporting the comings and goings of her visitors back to Swedo's family. Eventually, Bouley brought suit under the Fair Housing Act, a claim that was upheld by U.S. District Court in Vermont.
Sadly, this situation (minus the religious proselytizing) happens more than people might think. "Most of these [domestic violence] situations are [also] eviction scenarios," says Emily Martin, a staff attorney for the ACLU's Women's Rights Project. "A woman is abused by a visitor or someone else who lives in the apartment, and the landlord's reaction is to either to evict the whole household or the victim on her own."
Many victims of domestic violence find it difficult to come forward because of fear they will lose their apartment. "That's the kind of catch-22 these women find themselves in," Martin says. "When they take the steps that they need to, they are threatened with homelessness."
Because many domestic abuse victims fear eviction if they come forward, Deb Widiss, staff attorney with Legal Momentum, previously the NOW Legal Defense and Education Fund, thinks property managers and landlords can play an invaluable role helping such women come forward and seek help. "It's landlords communicating with their tenants that they're not going to take these kinds of actions so that tenants feel safe getting protective orders," she says.
–Les Shaver
New Trio
In an unexpected but powerful partnership, National Multi Housing Council, the Sierra Club, and the Urban Land Institute have teamed up on "Re-Thinking Density," a program designed to help citizens and local leaders understand how density can benefit a community. The groups will focus on selling the many advantages of high-density communities, including a reduction in traffic and taxes, additional housing, and lower pollution levels. –L.S.
Case Closed
After being sued over alleged lack of full compliance with the Fair Housing Act and Americans with Disabilities Act at 71 of its properties, Archstone-Smith has settled with three national disability organizations for $1.4 million in damages. Under the agreement, the REIT also agreed to make capital improvements in a number of its communities to make them fully compliant. –L.S.
Early Bird Special!
Want to stay ahead of the competition? Come to the Multifamily Executive Conference, which is Oct. 17-19 at the Mandalay Bay Resort and Casino in Las Vegas for networking, knowledge, and more. Register by Aug. 12, and you'll save $125 on your registration. To sign up, please visit www.mfeconference.com. See you there!
Going Public
There's a new REIT on the block. Boston Capital Corp. announced in July that it will begin offering stock in its $1 billion multifamily REIT, which will focus on market-rate properties. The portfolio, which currently consists of 10 properties located in four states, is expected to grow as the company raises additional equity. –A.R.
Safety Check
Lane Co.'s employee safety program is paying off. Between 2001 and 2004, the number of worker accidents dropped 42 percent. Plus, accidents serious enough to cause an employee to miss work dropped roughly 50 percent. The safety program includes mandatory training classes for all employees and weekly meetings for Lane Management associates. "Even in a field which doesn't seem inherently dangerous, there is always opportunity for improvement," says Lane's CEO Bill Donges, who started the program in 2002 when he joined the company. "One of my top goals became to make Lane the safest company in the multifamily industry." –R.Z.A.
Short and Sweet
Apartments.com's Renee Doerre hit a home run with her acceptance speech when the multifamily online listing firm's Web site received a "People's Voice" Webby Award in June. Traditionally, Webby award winners are allowed to say just five words at the podium. What were Doerre's? "Live. The. American. Dream. Rent." Other Webby nominees in the real estate category included Rent.com, www.houseplans.com, www.realestatejournal.com, and lastly, www.rowsatsoma.com, which won an overall Webby in the category. –A.R.
Last Call for the Who's Who The deadline to list your company in the 2006 directory is fast approaching! All listing requests and edits to last year's listings must be received by Aug. 15 to be included in the 2006 edition. Please visit www.multifamilyexecutive.com to download a listing form. Questions? Send an e-mail to [email protected].
Public Power
A Supreme Court ruling leaves property owners with few options. Apartment owners already worry about local governments that want to take over or tear down their properties. And, given the U.S. Supreme Court's recent ruling supporting the government's right to condemn private property through eminent domain, such pressures won't disappear any time soon.
Sometimes local officials target criminal hotspots. Earlier this year, officials in Prince George's County, Md., researched which properties had the most crime, code violations, and violence. Jack Johnson, the county executive, declared that Prince George's County would "take over" the properties if they weren't cleaned up. Eventually, apartment owners met with the county to develop plans for improvement. ("It was never about taking over the building and knocking it down," says John Erzen, a spokesman for Johnson.)
Other times, local governments want to demolish functional units for new retail, commercial buildings, or more expensive housing. "The basic message is usually that this new thing will be better and spiffier and produce more in taxes," says Dana Berliner, senior attorney for the Institute for Justice, a legal organization that works to protect property rights.
If a property is in the government's path, an owner can push the case into the public forum by questioning the viability, expense, and location of the proposed project. "If an owner finds out [his or her] building is in the path of project, their real recourse is political," says Paul Kiernan, an attorney with Holland & Knight's real estate litigation group.
–Les Shaver
Big Deal
Gables goes private. In early June, ING Clarion Partners initiated the biggest REIT-to-private company transition by buying Gables Residential Trust in Boca Raton, Fla., for $2.8 billion in debt and cash. New York-based ING will pay $43.50 per share in cash, or a 14 percent premium over Gables' closing price the day before the transaction was announced.
The extraordinary return Gables earned was representative of the bigger real estate market, says Richard Anderson, senior real estate analyst at Maxcor Financial Group. "It put some reality and dollar figures on what we all know: The real estate market, and specifically the residential real estate market, is very hot," he says. "It's a fantastic time for owners to sell."
Making the timing even more opportune for Gables is what was happening to the company at the time. Anderson says the company had promised to pay shareholders a regular dividend. But with shaky fundamentals making this difficult, it was selling properties to meet its dividend expectations. "They were running in place to cover that dividend, and here's an opportunity for them to wash their hands of all of these problems and do the best they can for their shareholders," Robinson says. "I saw this as a great time to sell for them."
On top of this, the management at the company will remain in place. "The change provision was triggered, they got a high stock price, and they can keep their jobs," says Louis Taylor, an analyst with Deutsche Bank Securities. "It doesn't get much better than that."
–Les Shaver
Executive Feedback
What's your most creative performance incentive?
A: "Our outstanding leasing professionals receive either a gold pendant in the shape of our logo or a tank watch when they reach the $500,000 volume mark. Diamond and emerald bracelets and certificates for trips and merchandise mark subsequent milestones."
–Julie A. Smith, president, Bozzuto Management Co.
A: "Top performers are awarded an all-expenses-paid, three-day vacation to Las Vegas and $750 in chips to spend at will. The annual event kicks off with a gala dinner where the top 20 percent of performers in several categories are recognized."
–Martha Carlin, senior vice president, director of property operations, United Dominion Realty Trust
A: "We have a senior executive on our management team that tells a story about her first year in the multifamily business some 20 years ago. Upon hitting an all-time leasing benchmark, her COO showed up, unannounced, in her driveway and presented her with the keys to his new Mercedes for the weekend. While the car was a great treat for the 21-year-old leasing consultant, the message he sent inspired [her] for years to come."
–Jennifer Buchanan, senior vice president, Greystar Atlantic
Project of the Month
Urban Oasis: Alexan Fontaine Marina del Ray, Calif. The trickling sounds of a gentle, cascading waterfall can be heard, exuding a sense of calming tranquility. A tiny pond below is set amidst a lush tropical landscape. Nothing beats paradise.
Except this is no ordinary oasis. It's actually the Alexan Fontaine, an apartment project located deep within an urban commercial district.
The four-story, 102-unit apartment complex is located in Marina del Rey, Calif., and is managed by Trammell Crow Residential. While the apartment's inner sanctum offers residents a slice of paradise, the project's outer world is anything but a tropical haven. Alexan Fontaine is surrounded by an industrial streetscape: A public storage facility is located nearby, as well as a dog kennel and automobile detailing shop.
That's why the folks at Architects Orange designed Alexan Fontaine to focus "inward" rather than out. RC Alley, a partner at the Orange, Calif.-based Architects Orange, says designing the project around its unappetizing views was one of the toughest challenges. So, the firm concentrated the project around two courtyards. One features a waterfall; the other offers a tropical-themed pool.
All the units are arranged in a stacked flat configuration with lofts on the upper floors. One- and three- bedroom units range in size from 645 square feet to 1,482 square feet, with nine-foot ceilings in the living areas. Monthly rents range from about $1,700 to $3,400, and Michael Genthe, managing director at Trammell Crow Residential, says the project is about 95 percent occupied. –Abby Garcia Telleria