Anaheim, Calif., is building a new central business district in what has traditionally been a sprawling suburban community. Windstar Communities, LLC, the first developer to get a project under construction in the new district, is using it as a launching pad for a series of projects that will leverage infill and smart-growth development ideas into a future with long-term value growth.
The district, dubbed the Platinum Triangle, encompasses 820 acres around the Major League Baseball park Angel Stadium. It is expected to include 9,175 residential units, 2 million square feet of retail space and 5 million square feet of office space by 2015.
If all goes according to plan, Windstar will help lay the foundation for a well-planned approach to community development in Orange County, and it will also lay the foundation for success for this relatively new company.
Windstar is developing the mixed-use Stadium Lofts in the Triangle. The six-acre development includes 390 luxury residential lofts and stacked flats. It also has room for an 8,100-square-foot restaurant and 9,817 square feet of retail and clubhouse space. Anaheim Mayor Curt Pringle called Stadium Lofts “exactly the kind of high-caliber, mixed-use urban development” the city wants in the new district.
Windstar broke ground on Stadium Lofts in December 2004. Suffolk Construction is the contractor on the project, which was designed by Meeks + Partners to include details and styling inspired by Frank Lloyd Wright. Residents are expected to begin moving into the first units in April or May of this year, when construction is scheduled to be complete. The 14 floor plans range from a 550-square-foot studio to a 1,398-square-foot unit with two bedrooms, two bathrooms and a den. Rents will be about $2 per square foot, according to Windstar. At press time, preleasing had not begun, but the company had more than 1,000 names of people who were interested.
Stadium Lofts is not only the first development in the Platinum Triangle, it is the first development of Windstar Communities, LLC, the three-year-old residential division of Nexus Properties, Inc., which created Windstar to diversify beyond its core business in office, light industrial and biotech buildings.
A running start
Since Windstar bought the site for Stadium Lofts, “the whole Platinum Triangle is almost all spoken for,” said Eric Heffner, a Windstar principal who joined the new company after working at California developer Western National Group.
Though it was first into the ground, Windstar remains a relative youngster in the Triangle. Perhaps the most significant other player is Miami-based Lennar Corp., which builds tens of thousands of homes a year. Lennar won approval in late October 2005 to build A-Town, a 41-acre site in the Triangle that will include 2,681 units in as many as 11 high-rises. The development will also include 150,000 square feet of commercial space. Leasing could begin in late 2006.
Windstar is already at work on other developments. Pacific Place will be a 420-unit project located near Los Angeles International Airport. It broke ground in December 2005, with the first residents expected to move in during summer 2007 and total completion later that year. That development will be an “A-plus” luxury property drawing workers from defense contractors and other local booming industries. Heffner estimates the rents will be about $2.05 per square foot. It is the first apartment complex to be built in that market area in more than two decades.
Windstar is taking a different approach in Irvine, Calif., where it will be counter-programming against the condominiums and luxury rentals that dominate the market. It is in the planning stage for a Class B property called Irvine Crossings, a family development that may include 680 units in its first phase, also with rents of about $2.05 per square foot. It will be located on a 22-acre site that Nexus had purchased and that is in the process of being rezoned to allow residential in what is currently an area dominated by industrial buildings.
Windstar’s corporate life began when it got in on the ground floor, so to speak, of Anaheim’s planning process for building a downtown-like district. For Stadium Lofts, Heffner said that Windstar originally put up a “couple million dollars” in predevelopment funds before the project was even entitled. “We worked on a lot of faith in the city of Anaheim’s development program,” he said. It then brought in equity partner Cornerstone Real Estate Advisers, LLC, a Hartford, Conn.-based investment firm that is part of Massachusetts Mutual Life Insurance Co. and has more than $6 billion in properties or committed capital under management. Cornerstone is also an equity partner in Pacific Place.
Heffner declined to give details on his projects’ financing for competitive reasons. But he said his young company was able to attract 100% construction financing for Stadium Lofts from Bank of America because Cornerstone backed the project on the strength of its balance sheet. He said the equity partner will also fill any gap that exists when he lines up permanent financing for the project.
Cornerstone believes its partnerships with Windstar are a good bet in a tight housing market. “The Southern California multifamily housing market is very healthy, with increasing values and demand that is forecast to exceed supply in the foreseeable future,” said James R. Howard, Cornerstone vice president. “Stadium Lofts and Pacific Place will each offer competitive advantages in their markets, including excellent-quality units and community features and locations near employment, freeways, entertainment and retail amenities.”
Howard also praised Windstar as a strong partner that “has demonstrated great vision with these projects and the capability to convert the vision to reality.”
Sometimes that vision can be altered as circumstances permit. Though Stadium Lofts is planned as a rental community, that could change, given the feeding frenzy in Orange County for any multifamily residential properties. Windstar executives developed the property with the intention of owning it for the long term, earning cash flow from it and building up the new company’s net worth. “Quite frankly, in Anaheim, we’ve received a number of unsolicited offers on that property. It’s made us take a step back and wonder whether we want to sell it, hold the units as rental, or convert them ourselves into condominiums,” said Heffner. “With the opportunities being offered to us at Stadium Lofts, we’re looking at it pretty seriously because it could allow us to seed our company [significantly] for the future.”
Smart-growth opportunities
The decision of Anaheim’s leaders to adopt a smart-growth plan is not as out of place as it might seem.
Sure, Orange County is the epitome of suburban sprawl to many people. It is where many of the moneyed or the harried went to escape Los Angeles and get a bit more lawn. But as the region’s economy and population have continued to boom, the local municipalities have begun to adopt approaches to urban planning that are more often associated with dense urban centers like San Francisco or Chicago.
That makes it a perfect place for Heffner, who says economics and common sense make it worth his company’s investment in time and money to build along smart-growth principles. “We’re not keen at all on going to the outskirts and building apartments in master-planned communities,” said Heffner. Instead, high-density multiunit properties, locations near mass-transit routes, mixed-use buildings and environmentally friendly construction and design all factor into his strategy.
Consider mass transit, even in a car-crazy state such as California. Anaheim is considering making the Platinum Triangle area a transportation center that would include a hub for high-speed trains, buses and taxis. Stadium Lofts is designed to wrap the housing around a parking garage, but it is also designed to take advantage of foot traffic to provide commercial amenities so residents don’t need to get into a car to get a bite to eat, for example. That advantage is not likely to go away, according to Heffner, who thinks gas prices will stay high and will prove the wisdom of his approach. “There’s a greater chance that we’ll see $5 per gallon than again see $1 per gallon,” he said.
He also wants to investigate using green building techniques, despite their added construction costs. “Keep in mind that our goal is long-term ownership of these projects, and we want to build in [locations] that are sustainable – not only because of all the people there but because it’s built well,” said Heffner. For example, at the Irvine Crossings development, Windstar will take the concrete that currently completely covers the site and reuse it in the construction materials of the buildings themselves.
Mixed-use developments like Stadium Lofts bring their own challenges, some of which don’t become evident until the exact tenant mix is determined. For example, having a large restaurant on the property raises issues of dealing with smoke and noise from the commercial tenant. “You have to design your project to really insulate for sound, so the kitchen smoke goes through the building and you don’t negatively impact your residents,” said Heffner. On the maintenance side, he said property managers have to determine who’s responsible for things like litter – was it created by the restaurant’s customers or by the residential tenants?
Despite those challenges, Heffner expects that using smart-growth approaches will do more than add value to his properties; in some cases, he sees their inclusion helping to get the buildings built in the first place by defusing tensions with environmentalists who might otherwise oppose further development.
