Alley's End (4th & EK Gaylord)

[warreng88]

I was at the OKC Chamber Ambassadors meeting on Thursday. Roy Williams got up and spoke about what was going on in the metro area, breaking it out to DT, BT, MT, Uptown, Chisholm Creek, etc. After his presentation, he took questions and one of them was about a DT Grocery Store and he brought up Native Roots and said there is a need and they (the Chamber) are looking at it and exploring other options like a market where there is one store for cheese, one deli, one for vegetables, etc. I brought up Sprout's at this location (which Pete has discussed a few times) and he said that Sprout's does not have an urban grocery store model. The Chamber has talked about Wal-mart and Target urban grocery stores and would love for a local store like Crest or Uptown Grocery, but those stores don't have an urban model either. I hope we get a Crest, UG or Sprout's and don't have to settle for another Wal-Mart.

[Pete]

That's interesting.

But you don't really need an urban model to go in at this spot, which is one of the reasons they have designed the retail building as somewhat separate.

[warreng88]

That's interesting.

But you don't really need an urban model to go in at this spot, which is one of the reasons they have designed the retail building as somewhat separate.

Right, but I think the model of a sh!t ton of surface parking is what most of these stores are built on and not having that parking makes some of them nervous, since they have not done an urban grocery store and think the money might be spent better elsewhere,

[Eric]

Let's assume this happens. What are they doing that is allowing them to get funding for rental. This is pretty unheard of even in larger metro areas. Or is this a "sign of the times". Are buyers drying up because of a tightening credit market. Is their support for high rental rates? Just curious, because this seems WAY out of left field. What is making this one doable.

[DenverPoke]

Let's assume this happens. What are they doing that is allowing them to get funding for rental. This is pretty unheard of even in larger metro areas. Or is this a "sign of the times". Are buyers drying up because of a tightening credit market. Is their support for high rental rates? Just curious, because this seems WAY out of left field. What is making this one doable.

Not sure where you are getting this, most major metros are throwing up thousands of high rise rental units. OKC is definitely behind in this regard.

[OKIEDOKE]

Let's assume this happens. What are they doing that is allowing them to get funding for rental. This is pretty unheard of even in larger metro areas. Or is this a "sign of the times". Are buyers drying up because of a tightening credit market. Is their support for high rental rates? Just curious, because this seems WAY out of left field. What is making this one doable.

People can't come up with the 20% down payment, but they can come up with the monthly rent payment.....They want instant gratification, instead of planning and saving.....might have something to do with huge student loan debts....

[Pete]

A lot of people don't care about owning.

The downtown rental market is still pretty hot, even with over a thousand new units in just the last 6 months or so.

And, developers love apartments because they can hold as a rapidly increasing investment.

The for sale market is plenty hot downtown as well.

[LakeEffect]

The for sale market is plenty hot downtown as well.

As evidenced by the 701 N Hudson pricing and reserved spaces.

[catch22]

People can't come up with the 20% down payment, but they can come up with the monthly rent payment.....They want instant gratification, instead of planning and saving.....might have something to do with huge student loan debts....

I'm sorry but this is total bull-crap. Wages have not kept up with cost of living. My rent payment is $1,200 a month for a suburban 1 bed room 20 miles from the city center in Denver. That is equal to or more than a mortgage payment for many decent homes. If you are young, you simply cannot get ahead enough for a down payment. The system is rigged. If you go to college for a degree, you are lucky if you can afford the student loan repayments. If you don't go to college, you can't get a job that pays what the cost to live is. We are screwed either way. It's not about not wanting to save money -- it's simply not having any money left at the end of the month to save. There's simply no money left at the end of the month. We are forced into renting. I'm not alone. It's not about instant gratification -- it's about the cost of living no longer being in the ballpark of wages. I work 45-75 hours a week. We go out to eat (usually fast food) maybe twice a month. It's not about laziness or instant gratification. Most renters in my age group would love to own -- we just cannot get there as we are paying someone else's mortgage and jumping through hoops.

[Eric]

While I'm not going to get into why people rent (which I personally think is a function of necessity), I mostly was interested in how the developer is getting the funding. It seems like anything of this magnitude would need to be pre-sold before construction started. Even in much larger metro's it is fairly unusual to have new construction high rises that are predominantly rental units. Vertical building is significantly more expensive than low rise. And those developers are asking for handouts. How in the world is this guy going to get financing for this project?

Call me skeptical. I just don't see this happening unless the economy in OKC improves by a significant clip.

[Pete]

How they get financing: Work up a pro forma that shows rents and cash flow that will cover debt service, then demonstrate those rents are realistic in the market.

Downtown rent has been rising rapidly which -- combined with some public assistance -- places these pro formas in the ballpark now.

To be sure, and lender will make them jump through plenty of hoops to support the required rent numbers. I'm sure they've already floated this and feel confident they are somewhat close, otherwise they wouldn't be spending money buying more land and hiring expensive Dallas architects.

[Eric]

How they get financing: Work up a pro forma that shows rents and cash flow that will cover debt service, then demonstrate those rents are realistic in the market.

Downtown rent has been rising rapidly which -- combined with some public assistance -- places these pro formas in the ballpark now.

To be sure, and lender will make them jump through plenty of hoops to support the required rent numbers. I'm sure they've already floated this and feel confident they are somewhat close, otherwise they wouldn't be spending money buying more land and hiring expensive Dallas architects.

You would think. Just hard to imagine floating something like this when nothing over 5 stories has been built recently. I understand the logistics of trying to get financing. Just curious what could have possibly changed that made something like this feasible? Just seems way out in left field considering the current crop of development. It's not like they are saving huge on land, they have a huge lot. So there goes what is normally an economic savings of reduced foot print. Construction costs are likely double per square foot what it would be for low rise construction. Based on estimates it looks to be double the cost of the Edge and Level, with only 50% more capacity per acre. Heck, plop one more level on the Edge and we are talking nearly identical unit counts. This just does not seem fiscally feasible in my opinion. At best 5% chance this thing gets built.

Even in downtown LA, where I would assume land would be much more expensive than here, they are seeing a huge amount of low rise rentals going up. It's barely more dense that Level.

[AP]

I mean someone has to be the first or it would be a never ending cycle...

[DenverPoke]

While I'm not going to get into why people rent (which I personally think is a function of necessity), I mostly was interested in how the developer is getting the funding. It seems like anything of this magnitude would need to be pre-sold before construction started. Even in much larger metro's it is fairly unusual to have new construction high rises that are predominantly rental units. Vertical building is significantly more expensive than low rise. And those developers are asking for handouts. How in the world is this guy going to get financing for this project?

Call me skeptical. I just don't see this happening unless the economy in OKC improves by a significant clip.

Again, this is not unusual in larger metros. Maybe 10 years ago it was but not presently. Here in Denver there are probably 12-15 rental high rises currently under construction and Seattle probably has at least double that.

[Richard at Remax]

I'm sure its been discussed but its probably easier to get financing for rent buildings vs condos. Rent will always bring in money to the developer/owner. The condos are a one time sale then it's off their hands. Much more high risk/high reward. I know that's a simple way to look at it but its fairly accurate.

[sooner88]

I'm sure its been discussed but its probably easier to get financing for rent buildings vs condos. Rent will always bring in money to the developer/owner. The condos are a one time sale then it's off their hands. Much more high risk/high reward. I know that's a simple way to look at it but its fairly accurate.

That's certainly the case right now where there are plenty of quality comps for rentals. As the for-sale market continues to grow and starts to stabilize, the financing for those projects should become easier to fit "inside the box" for most banks.

[DenverPoke]

I'm sure its been discussed but its probably easier to get financing for rent buildings vs condos. Rent will always bring in money to the developer/owner. The condos are a one time sale then it's off their hands. Much more high risk/high reward. I know that's a simple way to look at it but its fairly accurate.

And a lot of these get built and are almost immediately sold off to REITs or other investment firms.

[Pete]

Even in a hot market, for condos to get built there has to be a high level of pre-sales.

The Civic is a recent example of this. You can't build condos and just hope you find buyers... You have to have at least 50% of the units pre-sold with hard deposits.

Apartments are simply about extrapolating rents and running spreadsheets.

[Richard at Remax]

That's the thing too. Most of a condo tower would probably turn into rental units anyway. I have a friend in Chicago who is living in a large condo building where 80% are rentals and the owners live out of state. They just bought up plenty of units in presale then just rented them. I would probably do that as well if one were to be built here.

[Anonymous.]

That's the thing too. Most of a condo tower would probably turn into rental units anyway. I have a friend in Chicago who is living in a large condo building where 80% are rentals and the owners live out of state. They just bought up plenty of units in presale then just rented them. I would probably do that as well if one were to be built here.

This has already occurred with a large number of units in DT OKC. Block42, Maywood Lofts, and Central Avenue VIllas - are all invaded by tenants that are renting from the owners who live elsewhere. And I think the number keeps climbing because rental rates are higher than mortgage rates, easiest profit ever since these buildings are all fairly new and have little to no maintenance costs.

One issue that is arising right now, is these places have HOAs and basically the owners (who don't live there) vote against general improvements and other cost-bearing items. Thus, owners who actually live in their units are really getting the bad end of the deal.

[adaniel]

Generally speaking, an HOA will try and limit the number of rentals in a condo complex. If for nothing else, FHA won't underwrite mortgages on condos with more than 50% of their units as rentals. Most HOAs I am familiar with will try and keep it lower than that.

[shawnw]

Some people are just a fan of highrises. That includes me. I've lived in highrises for 10 years. If I moved out of where I am, I'd be more likely to pick another highrise if one is available. Also, I can absolutely afford to buy. But I don't want to. I am a renter and will be for the foreseeable future. Lifestyle choice that I'm fine by.

[Plutonic Panda]

Believe it or not, I too like high-rises and would love to see more in CBD.

[HOT ROD]

Hopefully, this one can be hugely successful as we're all predicting and OKC can get on a wave of high-rise apartment tower construction. As has been said, I also think OKC is a little bit late to the game on this but hopefully this will show how big of a city OKC is and we can get a residential high-rise boom going in downtown AND in the NW Business District (again).

as the previous few posters indicated, there is a high number of millennials who prefer the rent a high-rise apartment lifestyle, image, and convenience. Add in the seniors and i think this is a severe market desert in Oklahoma City that hopefully will turn around and see 5 or so significant high-rises. While I prefer there to be some diversity in heights, I'm moreso looking for there to be quality, well positioned high-rises to expand the CBD, take advantage of views, and expand the frontage offerings along the street.

Honestly, this has been the case in nearly every city that has built a light rail, subway, and/or streetcar so I'd expect no less in my hometown, Oklahoma City - which WILL turn around those rooftop numbers and get the retail boom we're all looking for.

[Anonymous.]

The market is very skewed towards high-end 'for purchase' units right now. Millennials getting into the swing of their careers and paying off student loan debts are the same ones spending the most money downtown. They would love to live downtown and buy. But it isn't feasible when everything down there is $300-500K. So renting for $1200 a month instead is much easier. Then once these young adults can finally afford a house with saving, they opt for the $150K bang-for-buck suburban homes in N OKC and south Edmond. What we need is this same price point on the downtown scale. So we are talking units that are like 6-800 sq feet. Minimalism is easy to sell to this age group.

The Civic is the first thing downtown for sale that isn't out-of-reach for that generation. Unfortunately, it is in a not-so-desirable part of downtown at this time. If OKC can get some multi-family row homes and highrises in and around Bricktown and Deep Deuce that can score this price point of $150-200K units, you will see them scooped up left and right.