Monday, April 18, 2016

Seventy Five Percent Solution

Developers want to do what developers do--develop property. And they do it for one reason only--to make money. And we have some developers who are going to develop apartments in Dunwoody's Perimeter Center.

Now they can't say that straight up. They have to spin (AKA deceive and mislead) the issue. First they'll say they're not building apartments, they're building condo's. But they have a problem which they will make your problem. And that problem is these units get built all at once but the retail real estate market won't absorb them all at once. Sales will take time. Rentals are quicker so they are going rent these condos making them indistinguishable from apartments. Plus this is a recurring revenue stream whilst sales are one-time transactional. This will not be rental by individual (like you renting your Four-Four-and-a-Door) but by a developer. A developer who will most likely hire a rental management firm to handle the day to days. Quacks and waddles like a duck.

The City negotiated a long term goal of seventy five percent owner occupied, except that is a "goal" five years out and the developer intends to put up for sale only fifty percent on day one. And the developer has already voiced his displeasure and intent to get a more favorable hearing from Council: "We hope by the time it gets to the council it will be more of what we are looking for."  The developer's mouthpiece acknowledged that seventy five percent was better than the ninety percent owner occupied the Planning Commission advocated saying: "We've had 16 banks talk to us ... and they can't finance at 90 percent owner-occupancy."

The fact is it will never be seventy five percent owner occupied. It will probably never make it to fifty percent. And it gets worse. The FHA will not give loans on these units because the developer will start, maybe, at fifty percent rental and the FHA only allows that if the remaining units are owner-occupied as a principle residence. Out of the gate FHA approval is highly unlikely. So who cares? Well one might expect Millennials to be a demographic most likely to apply for and get FHA loans. Who wants them around anyway? Oh, wait ... WE DO! Or so we say when catering to apartment-building developers.

And cater we do. There is a brash prevarication claiming this development will not spill over to our neighborhoods and won't affect homeowners' quality of life. Really? REALLY? Have these folks never heard of a silly little thing called SCHOOLS? Do schools not affect our quality of life? Have we included a no-children, adult only restriction? Can we? And just who might be interested in these schools anyway? You guessed it! Those pesky Millennials again. This "line of reasoning" sounds like a thinly veiled shill for the developers.

If these are condos, and that is what the developer calls them, then the appropriate level of owner-occupancy is one hundred percent. Zero rentals. Now if the developer needs a government handout, good luck finding one who doesn't, it is real simple. Write into the Declaration of Condominium that each and every unit can be rented for five years total over the entire life of the unit. To make sure they don't just amend the document, ensure that it can only be amended by a super-majorly of individual principal-residence owner-occupants and only after these residence own over fifty percent of all units. After the five years are used up the unit sits empty or you price it to sell. Hard. Stop. Oh, and whilst it sits empty you still get to pay the Condo Association fees.

Ain't gonna happen.

At the end of the day here is what we know: residential units will be built; many, then most, then almost all will be rental; there will be negative impacts on our infrastructure; there will be negative impacts on our schools; and the developer will not pay a dime in impact fees. And there are those amongst us who are happy to help out a poor developer.