Greater Dallas Co Development Alliance:

“Housing Development in Greater Des Moines”

Kris Saddoris, Vice President, Development, Hubbell Realty Company

Trends in Multi-Family Development – Nationally and locally:

•Location remains the most important feature (NAHB 2012 Study) •Apartment sizes are reducing for the first time ever•Generational differences•Millennials, Echo Boomers, Gen Y•Due to underemployment, flat salary growth, delaying life events, increased cost of college (more loans), first generation to grow up with a computer in the house, delaying having a family

“Live where the amenities are.” “What’s important is what’s outside your door”

“We have to completely re-think the product.” “The amenity is the city”.

“aPodments” “Sacrifice space for location.” “Drawn where they can socialize”

Two Emerging Trends in Central Iowa: MICRO

Smartspace SoMa, a 23-unit, micro apartment building by developer Panoramic Interests in the South of Market district in SF. Rents ranged from $1,200-$1,500 per month – 220 SF.

Two Emerging Trends in Central Iowa: “It’s cool to rent again!”

Gen Y, Echo Boomers, Millenials (50% of today’s applicants): A major recent survey of rental applicant demographics indicates they've emerged as the dominant group. That means their demands, tastes, quirks and lifestyles need to be addressed if the current wave of apartment construction is to be successful.

It's cool to rent again, and the millennials want the latest and the greatest in their apartments and are seeking status and the approval of their friends. It's probably the equivalent of what buying a new car was to older generations. Younger renters are coming from dorm life. They want smaller floor plans because they live outside their apartments a lot. Amenities outside the unit itself are becoming a strong point of differentiation.

Empty nesters (17%): Baby boomers moving from suburban homes want large apartments.

Winhall at Williams Pointe• 206 units• Broken condo deal• 8 bldgs, rim with 2 story• Large clubhouse• Pool, garages• $12.2 million• Private equity, debt• Washington DC equity partner with community ties

Rents - $1.04 - $1.25 PSF

Broadmoor – 310 units plus 250 additional units under development just east of Jordan Creek Mall.Fitness center, pools. Hot tub, theatre,Business center, clubhouse

Rents PSF - $1.17-$1.50 PSF

Walnut Lake – 180 units in Urbandale Including 1, 2 and 3 bedroom unitsPool, clubhouse, fitness center

Rents - $.95-$1.27 PSF

Current Developments:

Meadowlark – Grimes

120 Market units 84 LIHTC units 90 new Market units

Clubhouse, pools, fitness center, theatre

Rent - $.93-$1.17 PSF

Cottages at Johnston Commons

Meadowlark - Grimes

Riverpoint Lofts – Downtown DM

Melbourne – SE Des Moines

Affordable Housing Options – Low Income Housing Tax Credits

•Federal tax credit, allocated by state agencies annually •In Iowa – Iowa Finance Authority is the allocator•Credits are sold to investors to reduce debt to allow for affordable rents•Highly competitive process – 2014 - $23m applications, $7.6m awarded•Allocation is based on Qualified Allocation Plan (QAP) updated annually•2015 plan priorities are:

• Serving 30%/40% LMI residents, market rate units• Locations near services –groceries, schools, med services, library• Local government contributions – cash, land, tax abatement, TIF• Unit amenities, HUD vouchers, Olmstead, green bldg, qualified team

•2014 Dallas County increase - income levels averaged $1,200/yr. •Rents increased an average of $27/mo.•Current Income limits – family of four (60%) - $44,940

Historic Tax Credits

•Federal Credit (20% of qualified costs) – automatic if you meet requirements•State Credit (25% of qualified costs) – new system in 2014

•State credits were awarded via a lottery system in past years•New system post 2014 legislation awards via a “readiness” scale

•State credits are more easily sold although it can be a taxable event

•Federal credits underwent intense IRS scrutiny over the last year, and the purchasers are just coming back to the table – many changes in how partnerships are formed

•Redevelopments are subject to NPS and state guidelines and requirements

Other Housing Funding Options:

•Enterprise Zone Credits – discontinued by Legislature in 2014•Now “Workforce Housing Tax Incentives Program” - $20m in current year•Rules out for review right now•Requires communities to certify on an annual basis that they are a “distressed workforce housing community” based on factors including housing needs, number of building permits, vacancy, housing sales, etc.•Includes a $1,000 per unit local match•Maximum award of $1 million per project

•Redevelopment Tax Credits – also discontinued by Legislature in 2014•Will be re-drafted to included a competitive scoring component•Former Brownfield/Grayfield program

Single Family Homes & Townhomes

•Growth is continuing to be strong in both sectors•Lot development is becoming a challenge•Estimated starts for Dallas county in 2015 is 1,126, a 6.7% increase over 2014 (Market Graphics Research Group)•Similar to growth of the entire MSA area

•Current starts are 70% single family and 30% townhome units

•Hubbell is starting to see strong growth in the rental townhome market•Greenway Crossing – adding 57 rental townhomes to the development

Conventional

Conservation

Decrease impervious surface Street Profile

Increase pervious Surface

20 foot front yard

10 foot rear yard with 100 foot minimum open space between lots

Rear Yard Profile

• Improve water quality onsite and off

• Reduce erosion and the pollution associated with it

• Reduce standing water• Contain water rather than

introduce it onto adjacent properties and into water systems

• Reduce the cost for conventional infrastructure

• Create beautiful open spaces

Senior Housing

State Resident Population65 Years Old and OverAccording to the 2010 Census 1. Florida - 17.3% 2. West Virginia - 16.0% 3. Maine - 15.9% 4. Pennsylvania - 15.4%5. Iowa - 14.9%

•Alzheimer’s disease is the 6th leading cause of death nationally•1 in 3 seniors dies from Alzheimer’s or some form of dimentia•Average age entering Assisted Living facilities is 85+.

Roles in Development:

The most successful developments are those in which the parties understand it is a partnership – working together the best understand the challenges and benchmarks necessary to make it successful not only during the height of the real estate market, but also the lows of the market.

Developer Role: •Understand community and neighborhood needs and dynamics•Know appropriate product type/amenities/costs for long-term success•Bring financial acumen and solid financial strength•Bring financial investment partners & acceptance of financial risk•Clear knowledge of how to deploy construction and delivery•Historic track record of success in all items above in various market

Communities role in Development:

Successful communities work to understand the needs and strengths of their community, and what types of developments fit both. In addition, they understand the role various types of real estate can support the diversity and success of the community. Finally they appreciate that all developments are a business and therefore, must be financially feasible over the long term.

Recommendations:•Understand your community from a macro point of view.•Understand the REAL impact of the development (as opposed to NIMBY)•Get to know the real costs of city requirements from a cost/benefit analysis•Take the time to learn the realities of each type of development in a setting outside of an approval cycle when emotions can run high•Know what your sister cities are doing and providing – benchmarking•Realize that real estate is constantly changing – it may not work today

Expectations for smaller communities

•Know your community from a numbers point-of-view •Housing Study – third party opinion•Appreciate that real estate costs are the same or greater than larger communities, while rent levels are typically much lower•Understand what the community can provide to help bridge that gap•Every development must be financially feasible•Understand the barriers the Developer will face with lenders/equity•Assist in creating partnership within the community in advance•Educate staff and council members

Case Study – Grinnell (population – 9,118)

•Approached Hubbell in August 2012•Completed Housing Study in Fall of 2012•Understood their development opportunities

•Spaulding Lofts – 77 units•Historic rehab of old buggy factory•$12.5 million project, 8 layers of financing•Federal & State Historic, Brownfield, LIHTC credits, City 10 yr tax abatement•Developer Equity, conventional debt, capitalize TA, Deferred Developer fee•City had acquired and cleared land adjacent for parking

•Units will deliver in early 2016 – Rents range $.79-$.95 PSF