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Jan. 31, 2012

What to Build Now

By Michael Russo, Contributing Editor

Rumor has it that the first apartment community featuring wood podium construction was completed somewhere in Arizona last December. Design-wise, it’s still under investigation, but wood podiums may represent a large paradigm shift in the way rental properties are built in the future.

“Wood podium is basically tuck-under apartments on steroids,” says Dan Withee, AIA, LEEDAP, partner with Withee Malcolm Architects LLP in Torrance, Calif. “Every builder I have talked with over the past year is looking at it.” And so is Withee. His firm has an 85-unit wood podium project called Mission Brewery in San Diego scheduled for completion in April 2012.

On paper, wood podium construction is simply an extension of what designers have been doing for almost 60 years—tucking cars away under units in one-space depths directly off concrete driveways.

“I was speaking with a builder yesterday who said he would be reluctant to include a wood podium on a luxury project,” says Withee. “He was concerned about noise, maintenance and other unanticipated issues. On the other hand, it may cost him $15,000 per parking space [for concrete] compared to $9,500 for wood podium.”

The potential trade-offs may well be worth it in suburban areas where developers can’t get more than $2 per square foot for rentals. If land costs aren’t affordable, the only way to make a prospective project work is by cutting construction costs.

The ‘boom’ days are over

From 2000 to 2005, when both condo and real estate values were much higher, the market was willing to pay the extra cost ($20,000 and up) for concrete podiums. But sales and market values have decreased to the point where the higher costs of concrete podiums just don’t work anymore.

However, suburban renters still need parking spaces, and the industry is looking at “every possible cost-savings scenario that wasn’t explored back in the ‘boom-boom’ days,” says Withee. Indeed, wood podium is just another form of Type V, one-hour construction. Take away the rebar and forming required of concrete, and the builder can shave almost five months of construction time off his project.

“It’s certainly not for every builder,” continues Withee. “This is especially true for owners who may be holding onto these buildings for 40 or 50 years. They may be asking themselves, ‘Do I really want to build this out of wood?’”

In the City of Los Angeles, some building inspectors appear to be going out of their way to make wood podium work more difficult. “They are basically hammering builders on everything that may affect one-hour ratings,” says Withee. This includes additional requirements for passive fire protection systems like fire stops to seal openings and joints in fire-rated wall assemblies. The extra costs and push-back from building inspectors are convincing some builders in Los Angeles to return to wrap-around parking designs.

The question is how to develop high-density apartment projects in A locations while lowering construction costs.

Because parking drives costs up sharply—and the need for housing in some cities is increasing—it’s likely that building inspectors may begin to accept wood podium in urban areas more readily.

Of the four typologies used by designers, on-grade, walk-up apartments with open parking are the least expensive. Then comes wood podium, at about $27 per square foot of garage space, and wraps at $35 per square foot. Concrete podium garages top out at almost $45 per square foot. All of these costs are typical of Southern California and similar markets.

“I just confirmed with a couple of contractors who are doing wood podiums in San Diego that their costs are $9,500 per apartment parking space,” says Withee. “Many apartment developers I run into tell me they just can’t afford concrete podium any longer.”

Of course, designers aren’t going to specify an open courtyard on top of a wood parking garage, either. The wood podium needs to be covered up or be protected by the units themselves. As far as noise abatement, pouring hard rock or additional sound-proofing are two possible solutions.

“You can design around almost anything,” says Withee. “The challenge is to either recognize right off—or attempt to predict—all the things that can happen when wood podium is used. Like any other ‘solution,’ wood can create unanticipated issues down the road.”

Costs are up, and lending is tight

For the past 30 years, Blue Sea Development Co. LLC (BSD) of Huntington, N.Y. has been a leading player in the affordable housing market. The firm is located in what is arguably the focal point of affordable housing development in the nation—the New York City municipal area.

“Affordable housing may still be considered a stepchild, but it is one of the most powerful economic engines in New York City these days,” says Les Bluestone, president of BSD.

New York is a mecca for affordable housing for a variety of reasons. Mayor Michael Bloomberg is committed to the concept; New York’s housing agency—the Department of Housing Preservation and Development, the affordable financing arm of the city—the Housing Development Corp. and the New York State Homes and Community Renewal agency are all “extremely committed” to affordable housing growth, says Bluestone. “We are fortunate enough to be working with people who are truly committed to the cause, and that has helped raise the bar on the definition of affordable housing.”

Unfortunately, development is slow because traditional lenders are reluctant to offer financing in spite of their claims to the contrary.

What’s the problem with the banks?

According to Bluestone, the answer is often obvious: “There is some credit officer behind a curtain making a decision that’s not based on facts.”

Withee sees the same trend in Los Angeles. His firm had lined up a positive “perfect storm” of a project in an area with 90,000 jobs, light rail transit and little to no housing.

“The project fell out of escrow because the capital markets dropped the location from an ‘A’ to ‘B+’ due to a lack of retail and a nearby industrial area.”

A recent scenario in New York described by Bluestone is even more frustrating. His company was working with a bank on a number of projects during a one-year period, and all of a sudden the lending terms changed dramatically.

“This bank is working with the same borrower (Blue Sea), in the same city,” says Bluestone. “It’s a project almost identical to one four blocks away that closed three months earlier, and the bank had been hurt before,” recalls Bluestone. “The lender just shrugged his shoulders and said the decision was out of his control.”

Fortunately, BSD and its general contracting division, Blue Sea Construction, are not limited to dealing with faint-hearted financial institutions. Government agencies, not-for-profits and savvy banks and investors make up 90 percent of BSD’s work, so the company’s market drivers are a bit different than they are for most multi-housing developers.

Re-energizing the South Bronx

BSD recently raised the bar for designing and constructing healthy, green and affordable housing in the city with its project, The Melody, an affordable co-op building in the South Bronx.

Financing was provided by the New York State Division of Housing and Community Renewal; Affordable Housing Corp. and SONYMA programs; the New York City Housing Corp.; and the Department of Housing and Preservation Development. Additional financial incentives were available under the NYSERDA Multifamily Performance Program.

The eight-story, 83,771-sq.-ft. building, which was completed in 2011, achieved Platinum certification under the LEED for Homes High-Rise pilot program. The development also complies with the New York State Energy Research and Development Authority’s (NYSERDA) Multifamily Performance Program for Energy Star buildings, which requires energy savings of more than 30 percent above code.

New York-based architect Aufgang + Subotovsky’s design for the $18.2 million project provides 63 apartments for families with two bands of income at or below 80 percent and 110 percent of the city’s average median income.

Through a first-in-the-nation partnership with Habitat for Humanity–NYC, the affordability level was able to reach down to 60 percent of the AMI.

The building features one, two- and three-bedroom apartments, with bicycle storage rooms, laundry closets in each apartment, a fitness center, landscaped courtyards with fitness path, a community room and parking.

“We make it our business to try and ensure these buildings do not look like affordable housing by its old definition,” says Bluestone. “If you dropped some of these projects into Midtown Manhattan or a high-end suburban community, they would be commanding luxury numbers without a doubt.”

This was accomplished in part through the commissioning of New York artist Beatrice Coron, who designed the building’s exterior ornamental ironwork, as well as art for the lobby and stairwells.

“You don’t need to be an architect to pick out the affordable housing projects built in New York 30 to 40 years ago. The typical 8×8 brick facades ‘just scream affordable housing,’” says Bluestone. “State and government agencies loved those designs—and they were probably the only ones who did.”

Visibly, the designs were questionable and they were not geared toward long-term maintenance, possibly because the required materials and technologies didn’t exist back then, Bluestone notes.

The general public is slowly coming around to realize that affordable housing is not part of a social program but an important economic driver. BSD’s clientele ranges from working-class families to residents just above the poverty level. But whatever their income, these residents want the same features in their apartment buildings.

“It’s important to make people feel proud of where they live, because they will become more vested in the development,” says Bluestone. “The demand for affordable housing is strong right now, and it will remain so. The challenge is finding the financing and putting the deal together.”

Because BSD has its own contracting arm, it can adhere to its own design rules-of-thumb. Small luxuries like glass backsplashes in kitchen areas cost more money compared to sheet rock and laminates. “But the impact on the people who see it and live there is huge,” says Bluestone, “not to mention the maintenance and durability benefits.”

During project meetings, Bluestone often asks senior personnel how they would feel if they lived in the planned development and what they would want inside it. “Nine out of 10 times, that’s all the guidance they need.”

Affordable housing design trends

Walking the tightrope between the demands of the various government agencies BSD works with is more of a challenge. Because the company owns and manages the developments it builds, long-term durability plays an important role in its decision-making.

Because government agencies are often supplying the land and financing for affordable housing, design goals sometimes conflict. These criteria are often minor when considering the big picture.

“It’s good to have goals for closet and counter space,” says Bluestone. “But the idea that you’ll lose a number of units from a building because the closets are five feet instead of 4.5 feet drives me a little crazy. Is it better to provide more amenities or more units?”

While modular construction isn’t very popular in multifamily, BSD sees the construction speed and quality benefits of using panelized pre-cast concrete.

“I don’t have to worry about poorly formed cross joints, or having to re-point the building in five years because of leaks,” says Bluestone.

The company has constructed six buildings so far using modular pre-cast design. However, Bluestone found that while the structure “went up like mad,” the other trades had trouble keeping up.

One solution has been the use of modular baths. These pre-fab products help cut down on the constant parade of trades coming in and out of  the most complex room in the apartment from a design perspective—the bathroom. Cutting back on trade visits to the bathroom saves a lot of time and logistical headaches.

In terms of materials, “whether it’s LEED, Energy Star or ISO 50001, what used to be a boutique-level of building is becoming the standard,” says Bluestone. “All of the approved materials are readily available—often at no extra cost. It’s not just about the environment anymore; it’s about economics.”

BSD completed its first Energy Star-rated building 10 years ago and found that callbacks on the job had dropped dramatically. “I’ll never forget it,” recalls Bluestone. “We had 210 units and just a handful of HVAC problems during one of the coldest winters in New York. And that doesn’t include the energy savings.” Today, all BSD buildings are LEED-certified, and three have achieved Platinum status.

In New York, an elevator is required for any building over four stories, and hydraulic lifts have always been the simplest to use and install. Although these lifts don’t require a machine room on the roof, the 30-40 hp machines depend on a huge reservoir of hydraulic fluid that must be changed and disposed of periodically. BSD has switched to a direct drive elevator made by KONE of Moline, Ill., which features a six-hp motor with no hydraulic fluid needed. “In terms of energy savings and disposal costs, it’s a no-brainer,” says Bluestone.

Today, BSD’s The Melody and other projects like it are full of technological innovations from wind turbines to micro-CHP (combined heat and power systems) to individual apartment background ventilation systems. Their current project includes a 10,000-sq.-ft. rooftop hydroponic farm to grow fresh produce for distribution to the building and surrounding community.

“However, all these measures are worthless if they are not assembled and installed correctly,” Bluestone concludes. “The Melody is a wonderful example of the quality in construction of these building components.”

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