Chances are you've seen the ads touting architect Michael Graves' collection of household items at Target stores. Well, that's not the only surprising place you'll find this famous architect. Look for his name splashed throughout the marketing campaign for Maxwell Place on the Hudson, a luxury mixed-use community he is designing on the waterfront of Hoboken, N.J.
"He is all over our design center that is about to open, our sales offices, our brochure, and our Web site," says Mary Boorman, senior vice president of marketing and strategic planning for Pinnacle, which is developing the 832-unit project with Toll Brothers.
Graves' name is everywhere–and for good reason. As more and more luxury condos and apartments go online across the country, it's getting increasingly difficult for developers to find ways to differentiate their properties from the pack. So developers are turning to high-profile architects, like Graves and Robert A.M. Stern, to give their properties a distinct, competitive edge.
Graves' image is the perfect complement to the upscale Maxwell Place, says Boorman. "We thought it would be a really good idea to bring in someone who has a branded image for special design," she says. "Our market is a lot of people who are very tied in with New York City and tend to be cutting-edge when it comes to what they wear and what they buy for their home." Graves is designing the building's lobbies and interior spaces.
Some developers are taking name recognition to a whole new level. At one of its Stern-designed projects, ARCWheeler Group, a Philadelphia-based developer, is offering upgraded units with products and finishes handpicked by Stern himself. The finishes–from light fixtures to flooring and crown molding–are prominently displayed in the design center for 10 Rittenhouse Square, a luxury condo project being developed in Philadelphia. And residents are willing to pay an extra $100,000-plus for these upgrades, says Robert Ambrosi, a partner at ARCWheeler.
High-profile architects, however, can bring more than just marketing opportunities to a project. Neighbor-hood groups and elected officials respond very positively to the assurance of high-quality design, says
Dick Knapp, senior vice president of Vienna, Va.-based KSI Services, which is building several communities in the Washington metropolitan area designed by prominent architects Stern and Cesar Pelli. And these designers know how to address a crowd of concerned citizens. "These famous architects are famous for a reason," Knapp says. "They can command the attention of a room and can be quite motivational and inspirational."
Of course, fame often comes with a high price tag. The architects' design fees are typically 20 percent higher than a pure production architect, says Knapp. Plus, you can expect higher construction costs, since they tend to spec more costly, detailed finishes for items like windows and trim. But these higher costs–some of which can be recouped through higher rents and sales prices–might just be worth it if you can sell 152 units in your building to residents in only two and half hours, as with Maxwell Place.
–Rachel Z. Azoff
On the Block
A new tax proposal threatens low-income tax credits again. "It's déjà vu all over again." So said Yogi Berra, but you can be sure the Hall of Fame catcher wasn't talking about affordable housing. But affordable housing advocates are concerned that history may repeat itself with the low-income housing tax credit.
Three years ago, the low-income tax credit (or LIHTC) was on the chopping block as an unintended casualty of the president's dividend tax plan. This time, the President's Advisory Panel on Tax Reform has low-income housing advocates on guard again. The panel's goal is to eliminate the alternative minimum tax. To afford this, it has recommended eliminating all tax preferences, including the LIHTC. Outside of the Hope VI program, which has funding battles of its own, the LIHTC is the only production stimulus for affordable housing.
The question now is how seriously to take this threat. David A. Smith, president of Recapitalization Advisors, an affordable housing consulting firm in Boston, remembers 1986 when no one took the Tax Reform Act seriously–only to have the legislation come back and turn the industry upside down. "We're going to be in an election year, and the repeal of the alternative minimum tax is going to very popular," Smith says. "To repeal it will be costly. We have to find somewhere to pay for that–whether it's through the mortgage interest deduction or changing the tax credits. I think it does need to be taken seriously."
But other affordable housing advocates think this isn't the time for a tax code change. "There will become an environment when, politically, the restructuring of the tax code happens," says Patrick Clancy, president and CEO of The Community Builders in Boston, which is one of the largest developers of affordable housing in the country. "But it certainly won't happen in this lame duck administration."
–Les Shaver
Famous Faces
Celebrities are already offered a whole slew of freebies, from cosmetics to designer gowns. Why not discounted condos?
A growing number of developers are offering celebrities price cuts or sweet deals toward the purchase of a new luxury condo, according to The Wall Street Journal. Developers then tout their celebrity residents to attract buyers. Huge billboards for Las Olas River House in Fort Lauderdale, Fla., highlight the building's VIP resident: former football superstar Dan Marino.
–Rachel Z. Azoff
At Your Service
Prompt maintenance and repair play a key role in resident satisfaction, according to a new survey from Owens Corning (a manufacturer of building materials). Seventy-one percent of multifamily residents feel that efficient, prompt, and reliable maintenance and repairs is an important factor in choosing a living space. Plus, 67 percent said that satisfaction with their homeowners' association or property management company would improve significantly if they showed a commitment to meeting maintenance needs more effectively and efficiently.
–Rachel Z. Azoff
Top Five Repair Requests
- Painting
- Plumbing
- Recaulking and replacing tiles on sinks and tubs
- Mounting or repairing doors and cabinets
- Caulking and sealing doors and windows
Winter Worries
The dreaded winter utility bills are starting to arrive. Heating fuel costs are expected to rise 69 percent to 77 percent for natural gas in the Midwest; 17 percent to 18 percent for electricity in the South; 29 percent to 33 percent for heating oil in the Northeast; and 39 percent to 43 percent for propane in the Midwest.
Expected Energy Cost Increases
(October 2005 through March 2006)
- Petroleum + 34 percent
- Natural gas + 52 percent
- Coal + 16 percent
- Electricity + 11 percent
–Rachel Z. Azoff
Fans in the Stands
All eyes were on basketball star Ron Artest when he returned from his suspension after going into the stands in a game in Detroit last year. When a fan sitting courtside started to poke fun at Artest during his first game back, everyone wondered what the player would do. Instead of charging into the stands, Artest walked over and high-fived his heckler, according to The Indianapolis Star. Who was Artest's new heckler? Jorge Perez, chairman of The Related Group of Florida in Coral Gables.
–Les Shaver
Indicted
When Jose Padilla was arrested in June 2004, the story made headlines in the multifamily industry: Padilla was accused of plotting to blow up apartment buildings. But when U.S. Attorney General Alberto R. Gonzales announced Padilla's indictment in December 2005, there was no mention of apartments. Instead, Gonzales accused Padilla of "providing–and conspiring to provide–material support to terrorists and conspiring to murder individuals who are overseas."
–Les Shaver
Supreme Decision
Ruling protects firms' traditional legal rights. Apartment owners with multi-state portfolios dodged a bullet in November when the U.S. Supreme Court reaffirmed apartment companies' right to be sued in federal court, rather than state courts in areas which they operate.
The case, Lincoln Property v. Roche, started as a simple mold suit, but soon became a case revolving around jurisdictional issues after a ruling by the Fourth Circuit of the U.S. Court of Appeals. That federal court, which covers Virginia and three other states, ruled that the Lincoln trial should instead be happening in state court because the Lincoln affiliate in question was operating in Virginia.
This represented a big change from the past, when apartment firms who were sued in a state other than the one in which they were headquartered could get the trial moved to federal court under what is known as diversity jurisdiction. The federal appeals court's ruling threatened that arrangement. "The whole purpose of diversity jurisdiction is that you can't give the plaintiff home court advantage," says Stephen Renna, senior vice president and counsel for the Real Estate Roundtable, a Washington, D.C.-based organization serving all real estate sectors.
If the U.S. Supreme Court had backed the Fourth Circuit, multifamily firms operating outside of their home state might have needed to change how they establish individual business entities. "It's a very important legal victory for the multifamily housing industry and the rest of the commercial real estate sector," says Howard Menell, tax advisor for the National Multi Housing Council.
–Les Shaver
Big Buyers
Toll Brothers condo-converts a Virginia apartment complex. Big home builders are boldly entering a new territory: condo conversions. Public builder Toll Brothers recently condo-converted an apartment complex in Leesburg, Va., purchased from Archstone-Smith's Ameriton subsidiary.
The property, Stratford Club, marks Toll's first conversion in the Mid-Atlantic region, says Scott Melnick, co-director of the institutional multifamily group for Transwestern Commercial Services, which brokered the $65 million deal. (Toll executives were unavailable for comment, despite repeated phone calls.)
Other home builders are quickly following suit, and for good reason, says Melnick. "Home builders need inventory and land takes more and more time to get zoned," he says. "When they buy a piece of land they never can predict exactly when it will be fully entitled and built, so the condo conversion scenario allows builders to get current income, or at least more predictable timing."
For Toll, the condo conversion of Stratford Club was a fairly easy transition from their usual business strategy of building new because the property was sold mid-construction, says Greg Gieber, an analyst for A.G. Edwards. (Ameriton had built the property, originally called Westchester at Stratford Farm, with the intent to quickly sell to a condo converter). "They are deviating from the model of being a builder to just one of a sales agent," Gieber says. The project didn't require any interior upgrades.
–Rachel Z. Azoff
Executive Feedback
How do you plan to stay competitive with the growing condo rental market?
A: "Apartment living means exceptional service, sophisticated amenities, and the flexibility to live an on-the-go lifestyle. KSI partners with companies like American Express and VIPdesk concierge to provide residents with ongoing services and convenience they cannot find elsewhere." –Karen A. Kossow, assistant vice president of sales and marketing, KSI Management
A: "BH has always focused on amenities and services for our properties. We will try to convert potential condo buyers into renters by offering them custom upgrades in their apartments. They will be able to select light fixtures, cabinet hardware, and window coverings to their decorating styles. It will provide them with a feeling of ownership in their apartment home. We want people to feel at home with upgrades and accessories like they see offered at Pottery Barn or The Home Depot." –Laurie Lyons, CEO, BH Management
A: "Condo investors are not operators [who] have a deep understanding of the needs of a resident, and therefore their customer service will most likely be lacking. The apartment industry also has a greater understanding of where and how to market for renters than the condo market does." –A. David Lynd, COO, The Lynd Co.
Project of the Month: Oleson Woods Apartments
Portland, Oregon Oleson Woods Apartments seems to be paying homage to Mother Nature. The 32-unit affordable housing neighborhood, located in Portland, Ore., reflects the delicate fusion between residential development and natural preservation, thanks to sensitive land planning and architectural design.
Carleton Hart Architecture designed Oleson Woods to harmonize with the site's natural landscape and wildlife habitat. More than a dozen mature tree canopies, some more than 2 feet in diameter, were preserved throughout the 3.1-acre site. The property's exterior design, featuring steep gables and a Northwest cottage style, also flows well with the environment.
But preserving the site's lush surroundings proved to be the designer's biggest challenge. The parcel seemed untouchable, mostly because of its thick strand of trees and seasonal wetland. Brian Carleton, a principal at the architecture firm, didn't want to strip the property's natural beauty, so the firm found a way to build around it and play up the site's natural resources.
Carleton's strategy was to go for less density to save the trees and wetlands. "We were focused on a sustainable design," Carleton says. "We wanted to be sensitive to the environment." Density is about 10 units per acre.
The architect also designed Oleson Woods to be energy-efficient. The project's green building elements include whole-house ventilation systems, on-site rainwater filtration, natural lighting, Energy Star appliances, and cement fiberboard siding.
Community Partners for Affordable Housing developed and manages the project. So far, two-thirds of the units are already leased. Monthly rents range from $328 to more than $700 for one- to four-bedroom units.
–Abby Garcia Telleria