Todd Williams, Grubb Chief Investment Officer, Delivers Insights on Innovations in Essential Housing

Our CIO, Todd Williams, recently was a featured presenter on a panel focusing on innovation in essential housing at the Affordable Housing Finance/Multifamily Executive Missing Middle Forum. The session was part of a larger two-day symposium focusing on the gap between affordable housing and luxury housing.

The session was moderated by Tamara Dudukovich, an independent community development consultant, and also featured Jennifer Baus, Senior Vice President of Design and Entitlements at The NRP Group.

Among Todd’s key observations:

  • Design efficiencies enable Grubb Properties to keep rents accessible to residents earning between 60% and 140% of area median income (AMI). By focusing on just six-floor plans, replicated across Link Apartments communities, we can generate significant cost savings while ensuring that the floor plans are optimized for tenants.
  • Smart site selection also makes a huge difference in cost savings. For example, Grubb will often buy older office complexes with large surface parking lots. We are then able to utilize the space in these parking lots to construct multi-family complexes, while renovating the office properties, essentially obtaining the land for the residential development for free.
  • Parking is the enemy of affordability. Grubb carefully selects locations that offer alternative forms of transportation and implements unique solutions including sharing parking between office and residential tenants to limit the amount of parking it needs to build. Over the past 10-15 years, we have moved from building 1.5 parking spots per apartment down to 0.75, and we are finding actual utilization to be closer to 0.73.
  • All Link ApartmentsSM communities include large Link Cycle Centers, going beyond the traditional “bike room” to include mechanic stands, rainy-day ride facilities, premium locker rooms, and plenty of room for all types of bikes.
  • Since Grubb is a long-term owner, we are able to utilize fixed-rate financing to reduce our variability of risk. We often use the 221(d)(4) HUD product, which offers 42-year loans at attractive fixed rates. The mortgages are also assumable, so buyers will often pay a premium if interest rates have risen.
  • We were a pioneer in Opportunity Zone funds, introducing our first fund in 2019. The Opportunity Zone program is a federal tax incentive to reinvest capital gains into low-income Census tracts, driving economic development in those tracts. We think it’s a perfect fit for essential housing, driving development without outsize gentrification impacts.
  • Our funds are more focused on multiples of invested capital than they are on internal rate of return (IRR). Our investors have received multiples of invested capital in excess of 2.5 times over the 10-year life of the fund.

 

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