← The Rent Roll with Jay Parsons
The Rent Roll with Jay Parsons
EP#85 Rob Reid | What Still Pencils Out To Build? + The Art of Placemaking
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Welcome, welcome. It's the Rent Roll, your podcast on all things rental housing, apartment, single family rentals, and build to rent. We're on episode number 85 and we got a fun one for you. Today we're going to be talking about what still works in apartment development. Sharing with you five common threads, five attributes, five characteristics for apartment projects that are breaking ground today or in the last recent months. And the context here is this. It's very, very, very tough environment right now to start new projects. Very tough. That's not hyperbole, it's brutal. Higher cost of capital due to higher rates, harder to raise capital due to the fact that a lot of investors still have capital tied up with project start a while back that aren't where they were planned to be. From a pro pharma perspective, given the increase in rates and the flatness of rents or the rent cuts we've seen in some market, in fact, it's harder to pencil out too, just because rents have been flat to negative for three plus years in a lot of markets. High concessions, elevated vacancy, yada yada yada, it's tough. So that's why starts are down more than 50% from peak. And that's why a lot of developers are saying, hey, look, starts are down. We wanted to build into an environment in 27 and 28 when there's going to be a lot less supply. And if the economy is in decent shape, we should see a better environment by then, a better supply, demand balance that could be favorable for development. But these deals still have to work and that's tough to do. That being said, development is not dried up completely. Some is still going. And so I've analyzed every project that started in the last 12 months to look for common themes and attributes of deals that are still breaking ground. And I'm gonna share those five things with you today. Now, one of those attributes is gonna tie in to long term placemaking. You know, whether that's urban revitalization or a master plan development. Most of us real estate nerds, you know, we love a good place making story where the developer or multiple developers take an olding, aging, eroding neighborhood and work with the city to restore it back to life. And that's often through mixed use development work, live play, and of course you can do this with greenfield development as well. And that can work really well. But sometimes the best and most interesting stories are urban revitalization. One of my personal favorites is the Pearl District in San Antonio. If you ever been to San Antonio, the Pearl District is The place to be, I mean, obviously the Alamo is great. Riverwalk is, you know, it's okay, it's worth doing once. But the real, real hot spot to be at is the Pearl District. If you know, you know, an old vacant beer brewing campus from the old Pearl Brewing and that was turned into the coolest neighborhood in San Antonio. And you could, we can name a lot of other examples too. I'm just picking one. And we're going to be talking place making in today's interview with Rob Reed of Kane Realty. And if you're not from the Raleigh, Durham area of North Carolina, you might not know Kane, but they're big time in the Triangle. They've invested heavily in place making across Raleigh.
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That's all they do.
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They're in the place making business and Raleigh's their backyard and they've really invested heavily in their backyard. And in fact, now some of Raleigh's coolest mixed use neighborhoods were built and developed and still managed by Kane. And so we're going to talk with Rob about placemaking and specifically how to make the residential component, multifamily housing, work in these developments. And then of course, talk headlines of the week impacting rental housing, more policy stuff, plus our recurring segments like Good Question, Good News, rental housing trivia, et cetera. So let's jump in and before we do, a big shout out to our sponsors. First and foremost, big thank you to jpi, a leading apartment developer with a state of purpose to transform building, enhance communities and improve lives. Check them out@jpi.com they're now building all across the country and using some really exciting innovations in technology for development and construction. Also, big thank you to Madera Residential. Check them out@maderaresidential.com thank you also to funnel@funnelleleasing.com, the sponsor of our interview segment. We'll talk more about them later. All right, so as always, kick things off with a little section we call Here's a chart where we share charts, data and trends. This section is sponsored by Hawthorne Residential Partners, a vertically integrated multifamily owner, operator and third party services provider with 60,000 units across the Sun Belt. Hawthorne has acquired or develops more than 26,000 units and has been named the number one property manager in the US for online reputation by J. Turner Research for the past four consecutive years. To learn more about Hawthorne's management services and investment partnership opportunities, visit hrpliving.com all right, so I'm going to give you five buckets, five categories, five common denominators for projects that are still breaking ground in today's environment. Before we get into the fun stuff though, we got to lay the groundwork. You know, I'm a data guy. Got to zoom out. Let's look at the macro supply story. Okay, let's go back to 2022. We had 585,000 units started. That was the highest since the late 1970s. Now last 12 months we're down 53%. So down to more than half. About 276,000 units started these last 12 months. So let's get a few macro observations about what's going on prior to getting to our list of those five characteristics. First, by property type.
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Okay.
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Yardi matrix data shows us that a larger composition of today's starts is affordable housing. And to be clear, affordable housing is down to LIHTC and other income restricted housing. That's down from the peak as well. We're down about 30% on affordable, but down even more. Down more than 50% in conventional. But clearly having some tax benefits from affordable housing can help deals pencil out compared to market rate. So that's a larger share of today's construction. Even affordable as a whole is a lower total absolute number. Secondly, what about building type? Now this gets pretty interesting. The narrative, and I've said this myself, I've contributed to the narrative is that low density garden deals are more likely to pencil out. But the data doesn't really back that up. And I was a little bit surprised by this. If we look at the share of construction today versus the 2024 vintage supply, which was the peak delivery period, that was the easiest way to make this comparison. Garden today is actually a smaller share of the pie from 46% of the 2024 supply versus 42% of the starts of the last 12 months. That's according to RealPage data. Podiums and high rises are taking a little bit larger share. Now that said, I wouldn't read too much into this. It's still very true that supply is falling faster in urban areas. And in CBDs, it's still very true that steel frame construction is harder to do. And it's still true that the supply drop is faster in urban than in suburban. Okay? But when we dig into this more, what we're going to find out is it's not as you can't just take garden as a, as a synonym for suburban. Okay. There's a little more nuance to this. And also we're going to see that some of the, some of the higher rise construct High rise construction is still happening, tends to be isolated in a few spots. That and not necessarily a national story. So we'll, we'll dig more into that in a bit. But that takes us to the regional story, and this is very interesting. Okay, now we all know that the Sunbelt in the mountains have been the epicenter for apartment construction, and on some level they still are. However, that share is shrinking fast. The Sunbelt and the mountains together comprise 65% of the supply in 2024, but only 48% of the starts of these last 12 months. That's a big drop off in market share, even if it's still the number much bigger than what we see elsewhere. Okay, so meanwhile, we've seen two regions that have been the lowest supplied and therefore the most consistent on rent and occupancy. That's the Northeast, the Midwest, of course, they're taking growing shares of Start, So still down a total unit basis, but up on share from 11% to 20% in the Northeast. So now, believe it or not, one of every five new apartment units started is in the Northeast region of the country. And the Midwest share has grown from 15% to 19%. West coast up more modestly 10 to 12%. Another interesting one to look at is by market size. And there's a clear pattern. The smaller the msa, the bigger the drop off. Small markets outside the top 150 in size, they're down 64% on starts from the peak. The middle tier markets ranking from 51 to 150 in terms of size, they are down 57%. And then the top 50 MSAs, the big MSA, as we all know, those are down 52% from peak and start to in starts. Then by metro area, we got a chart here showing that starts are down significantly. Pretty much everywhere they're down. Let's talk about some of the higher supplied places. They're down around 50% or so in Dallas, Phoenix, Orlando, Nashville. Austin's down 79%. Charlotte down 72%. San Antonio and Salt Lake down more than 80%. But we're also down substantially in places like, you know, Philly, Seattle, Minneapolis, and then you have places like New York. And in northern New Jersey, they're down too, but not quite as dramatically. And so that's why the Northeast is taking a little bit larger share of the overall starts. In fact, Jersey City is only down. I'm not Jersey City. Excuse me. Northern New Jersey is down just 20%.
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And then,
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so that's the macro story. Okay, now let's go deeper let's get to those five things I was, I've been teasing in this episode earlier. What are the common characteristics for the projects breaking ground? That's really what spurred this topic this week is thinking to myself is hey, you know, like we all hear about how difficult things are to get things going right now. So what are the common denominators or projects that actually break ground? And I use my new friend Claude to help bucket every apartment project that started over the last 12 months. And trust me, I couldn't just give this to Claude. Unfortunately it's not that good yet. I had to put in some elbow grease myself on this. But it sure does speed up the process. And so anyway, this analysis helped us reveal some common threads. So here we go. The first common thread, the common denominator we see in a lot of projects are still breaking ground tax incentives. So these are five buckets, first bucket tax incentives. And so I'll give you one that stands out. Jersey City, New Jersey. I mentioned earlier that northern New Jersey overall is down about 20% from peak on starts. And one reason for this is Jersey City. It's benefited from some pro supply tax policy there as well as overflow demand coming out of Manhattan. Jersey City uses a payment in lieu of taxes program. That program though is now under attack by the new mayor. And this is a big topic in the recent mayor race there that went through a runoff in December. And it appears that some developers raced to get some projects going prior to the pullback in the program. And certainly I wish that these people would just look at the data, look at the research, look at, forget the industry, look at academics and YIMBYs who've been talking with us forever. It's like, hey, they're complaining in Jersey City. It's like, oh, we don't need all this luxury housing, we just need more affordable housing. Yes you do. If you want affordable housing, build luxury housing. Because the filtering effect, you're pulling people out of middle income, low income housing when you build new luxury housing. But we'll see where that one goes. But anyway, that's a place where those development incentives have played a big deal. We've all seen it in other places like Carmel, Indiana. They've used some tiffs that's kept development active as they try to build a better urban core in that suburb of Indianapolis. And of course growth across Hamilton county is contributing as well. And then also in this category of tax incentives, we also see office to residential conversions and those almost always need some type of incentive or historic tax credits. Grants, other financing help because those deals are very complicated and expensive and you know, so I don't want to make, I don't want to overstate the role of office to resi conversions because it's not, I think we tend to overstate how much this is really happening. But it certainly is a piece of it. It's a small piece of it, but it's a piece of it. And we see that scattered across the country, especially in places like New York and Chicago, but also in Cleveland, Pittsburgh, St. Louis, et cetera. All right, our second bucket of common denominator denominators for projects breaking ground right now is going to be master plan mixed use development. And a lot of this is still happening in the Sun Belt. I was surprised and looking at the data, I was surprised to see how much of this is still penciling out. And the best example of that is Frisco, Texas which had already been, it's already built a lot of supply in this last cycle. It's one of the higher supplied markets in the nation, but was also of course one of the hottest demand markets in the nation, a mecca for job relocations as well. But there are, there are, despite all the supply and the rent cuts we've seen in this market, a result of supply. There are a bunch of master plan developments there where the developers and investors likely have longer term holds and atypical structures. Meaning this isn't your just usually not just your typical merchant build product where you build it, lease it up, stabilize, refinance and sell. You know, these are more likely to be longer term lenses that are being used for these types of projects. And probably projects have been planned in many cases for years even prior to the run up in rates and the softness and rents and whatnot. And they're still going. So we'll talk about some of this with Rob Reed, our guest today. I talk about place making, but again I just want to make the point that this is not your typical suburban garden deals. In fact, in places like Frisco it's more often wraps than garden deals, the Texas donut as they say. And there are some grants and tiffs associated with these types of projects. The broader development itself, not necessarily the multi family component. So again, this isn't commodity product by any means. It's master planned place making, longer term holds, mixed use, therefore less pressure on short term rents at lease up. When you have that longer term lens. In some cases too, you also have a partnership with a landowner in these or a longer term landowner where you also have Favorable land basis. And obviously Frisco is not the only one, just one I picked on here because there's quite a bit happening. And frankly in Frisco you almost have to be a master plan development given the, you know, Frisco is zone like Pleasantville and so most of it is master plan to get multifamily in there. But also you see that everywhere from Seattle to Florida and many places in between. But good to see Frisco still going and some cool mixed use projects there. Places like the PGA, the Fields, Frisco Station, the Star, etc. All right, our third bucket of what still is happening today for new construction overlooked submarkets. Okay? These are places that didn't see much supply in the past cycle and now that's part of the play. We want to get development into areas that didn't get it, areas that lack it, areas where under supply is still the story. That includes South Bay submarket of Los Angeles, particularly Torrance, California, one of the cities in the South Bay area. We could also include places like Ventura county in Southern California, as well as some of the more affluent suburbs of Portland, places like Hillsborough and Lake Oswego, and then also some secondary markets like Louisville, Kentucky where the South Central submarket has seen a real spike in starts. So you, and you can find a lot of builders that fit this billing as well. Now the key with this category of overlooked submarkets is it's not just about places that didn't build much because there's some areas that, let's be honest, they didn't build much for a reason. The demand drivers are weak, okay? And so you want to find places where you have the demand drivers to support it. Plus it just didn't get supply in recent cycles for whatever reason. And so that will even include some certain sub belt Sunbelt submarkets as well that just for whatever reason didn't get much supply in this, in this cycle. And, and, and that's where you could see some of the lower density garden apartments happening as well. And some of the lesser supplied suburban submarkets of certain Sun Belt markets. Fourth bucket, we're going to call this one the story. Okay, now some of you already know what I'm talking about here. The story. Stories are important. So this is a catch all, but it covers a very important category for apartment development and for a development of capital. So it could be a distressed basis acquisition, maybe acquiring a fully entitled shovel ready site from a developer who doesn't have the capital to start the project and needs an out you know, well capitalized developers, they love these kind of deals. Or it could be a project being developed by or with a partner who is a long term landowner in the site. And therefore the land basis is basically zero or very cheap. That helps. That's a good story because obviously acquiring land is not cheap. We have not seen huge discounts for land. And so the ownership can be a big, long term ownership of the parcel can be a big difference maker. Or it could also just be a really special project that's particularly unique in some way or another, either through physical attributes of the project, the uniqueness of the site, the location, or some uniqueness about the capital structure. So everybody loves a good story and a good story sells. And those deals still happen. And our fifth and final bucket, I'm calling this one Making it Work. Okay, we just make it work through construction efficiencies and value engineering. So you know, your cost of capital is what it is these days. The rents are what they are these days. And so in many cases you got to find ways to save on costs for these projects to make sense. And there's two ways to do that. Number one is value engineering. That's things like lower ceilings, smaller unit sizes, fewer amenities, lesser finish out. You're lowering the cost through doing less. And that can work, but you gotta be really careful because you want to make sure your rents aren't going to be similar to nicer product built a couple of years earlier. That's not going to work long term because people are going to choose a nicer deal for a similar price. And so you got to make sure there's a real rent discount to make those deals work. But you also can't let that discount be so substantial that you're not getting the, you're not offsetting the cost advantages that you're bringing in the deal. So this one could be tough, but it can work in the right spots if you do it the right way. This is where we talk about kind of workforce housing, where it's market rate, but more in that A minus, B plus category. Competing more with, you know, 10, 15, 20, 25 year old product, ideally. Okay, and again, these projects can really work, but they also cannot work if it's done right or in the wrong location, et cetera. So another way though, beyond value engineering is through efficiencies in the construction process without sacrificing on the product itself. And so not really value engineering as much as you are engineering your construction process to get things done more efficiently, using technology to reduce rework which can be a big cost driver, speeding up the construction timeline because obviously time is money, increasing the predictability, warehousing materials and building the same product in multiple locations, all of these things can help make the construction process more efficient and therefore more likely to pencil out. And by the way, we did an episode with this with the JPI leadership team last fall. Jpi, you know, doing a lot of cutting edge technology stuff and some really interesting things that leading developers like JPI are able to do to make what has been a very inefficient industry, that being construction, more efficient. Obviously construction has infamously been an industry that has been left behind through as as the rest of the economy has seen a lot of efficiency gains. And so it's encouraging to see some real progress now in that area. So that could be part of it. Making it work as well is just building things more efficiently. All right, so there you go. Five characteristics of apartment projects still breaking ground today. Next up, it's time for rental housing trivia. Today's trivia is presented by Foxen which provides a suite of value add solutions designed to improve operations compliance and property performance. Rethink renters insurance compliance, rent reporting and pet management with Foxen. Check them out@foxen.com that's foxen.com all right, today's question. Which submarket started the most construction or I'm sorry, which submarket started construction on the most apartment units over the past 12 months? All right, was it Brooklyn, Bradenton, part of the, you know, Bradenton, Florida? Was it Frisco, Was it Jersey City, New Jersey? Or was it South Bay in the Los Angeles area? So give that some thought and we'll give you that answer in a moment. But first it's time for Good Question. Good Question is presented by Grotto AI, a real time call and tour coaching for multifamily leasing. Grotto records every call and tour identifies what sets your best agents apart. Then through real time guidance helps you scale that to your entire organization. It's turn by turn navigation for the human moments in the prospect journey and its 360 degree visibility into every tour and call NMHC top 50 owner Widener apartment homes they saw a 80% increase in call to tour conversion and ramped agents from bottom top performers in two weeks using Grotto. So learn how Grotto can help your team increase leasing conversion at Grotto AI. And for a limited time listeners of the rent roll can get a Grotto free leasing diagnostic. Grotto will analyze your existing data, show how your top performers convert more leads and identify opportunities to drive conversion across your portfolio. So head to Grotto AI to book a call now. All right, so today's good question is something I get a lot from LPs at investor events. Won't apartment construction just surge back up once occupancy and rents rebound? And it's a very fair question and my answer is yes, but not really. And here's what I mean. If you're asking if starts are going to pick up as fundamentals improve, then yes, absolutely. But if you're asking whether we'll return to 2022, 2023 highs, then, then I think that's highly improbable. Probable. I think that was a once in a generation event resulting from a perfect storm of cheap debt of course, plus the COVID demand surge driving down vacancy to long term lows, plus the inflationary rent growth that we saw come after that, plus cap rate compression across asset classes pushing some capital from value add acquisitions in the new construction. So it to me it's just highly improbable that we have such a perfect storm of variables again anytime soon. So again, I think this is a once in a generation event akin to what happened in the 1970s. Starts will pick up eventually and in fact they are in some spots just not dramatically. But it's just difficult to see a scenario we get back to those levels in the foreseeable future. And I could be wrong, but it just seems very unlikely that we can see that happen. Next up in the news. In the news when we review headlines impacting rental housing. We got two big headlines for you this week. This segment is going to be presented by Authentic. If you're an owner, asset manager or developer running multifamily, here's the truth about leasing in 2026. A couple ILS accounts and cross fingers won't get you to stabilization. The properties that are winning are running a tight ship across paid search and social retargeting, email and SMS nurture. All coordinated and with one accountable team. Authentic built that system. They call it Demandador and it's one platform, one partner, one monthly number that scales to your velocity targets. Pod listeners get 50% off setup fees for a limited time. Head to auth.com d2d to see how it works. That's a U t h f f.com d2d d All right, so here's the biggest news of the week. The the House representatives has released its long awaited housing bill, should say some House leaders did and it's bringing it to vote this week. In fact, by the time you're hearing this, the vote may have already happened. But what is supposed to be the final version of the bill was released Tuesday afternoon. And you know, my thoughts on it are this. I mean, on the one hand, if this bill was released back in December prior to President Trump tweeting for calling for a ban on institutional home buyers, I think everybody in the housing business would be protesting the parts on this bill that seek to curb single family acquisitions. But on the other hand, this bill sure is a heck of a lot better than the Senate's version, which we've been calling the Road to Less Housing act because that's what it really would do, especially for rental housing, is reduce rental homes because it would make it really hard to do build to rent construction specifically. We've talked a lot about in that, a lot about that on this podcast. Well, the house version more lives up to its name. It really is the road to housing because it's pro supply. There's no BTR ban. It does allow build to rent both BTR communities as well as scattered site btr. There's also no forced disposition requirement. Now, it does ban most acquisitions of single family homes by investors with 350 plus houses. But there are a number of common sense exceptions including and very importantly renovate to rent, among many other things. So I've got a write up on my newsletter@jparsons.com of the original House bill. Again, it's been modified a bit since then, but they the main structure is still intact. And then once a bill finally does pass the House, I'll update, I'll have a new a new newsletter out there again@jparson.com Newsletter all right, next headline comes to the New York Times. It says rent is swallowing household incomes. Okay. And I gotta tell you, you know, this is one of those, it's true, but also deeply misleading narratives. And it's, you know, it's I, I've talked about this before, but it's one of those things that it bothers me because I think it really distracts housing advocates and policymakers from, from the real problems and therefore the real solutions. And I think it distracts housing investors from real opportunities if you believe this kind of broad narrative. Okay, now real quickly, I've talked about this a lot. Census data analyzed by Harvard Joint center for Housing Study shows us that if you make more than $75,000 with roommates, you spend less than 20% of your income on rent. That's well below the affordability threshold of 30%. However, if you make less than $30,000. You are, you are spending more than 80% of your income on rent. And that's obviously a huge problem. But this group doesn't live in professionally managed investment grade rentals for the most part. There's going to be very few exceptions to that. Okay, then here's the kicker. Over the last decade and in recent years, nearly all new renter household formation has been not from lower income households, but from upper income households making more than $75,000 a year and therefore spending around 20% or less of income on rent. And that aligns with private sector data as well that showed a similar trend, which is demand is moving up market. And so again, that's a really important nuance, the bifurcation of affordability. It's that K shaped story we talk about a lot these days, the K shape economy. Renting is part of that. So we need to focus on the implications, address the real needs and stop painting in these broad brushes that distract people, really distract all of us from the people who really need our help most, which is mostly families whose incomes can't even cover the operating costs of a typical apartment or single family rental. And that's the real problem. All right, next up, it's time for good news. And that's when we get a highlight good news happening across the rental housing industry, because there's plenty of good happening too, even if it doesn't get as much attention. And good news is presented by my friends at apartment life. Apartment life coordinators help apartment owners care for residents by connecting them in meaningful relationships. This in turn benefits everybody from the residents well being to the satisfaction of on site staff and the apartment community's bottom line. So if you're in the apartment business, check out apartmentlife.org all right, this week's good news comes from entryway, the nonprofit that helps individuals facing homelessness find career training and employment in the apartment industry. A fantastic organization that entryway is. And I want to tell you a story about two brothers in Atlanta. Okay. They just highlight what entryway can do for families. Okay, so first there's a, there's a guy named Marcus. He had dreamed of becoming a firefighter, but he had a health condition that forced him to walk away from that path. And he was just 25 years old at the time, raising a son on his own and searching for stability and a fresh start. He found Entiway and he got career training, mentorship and support to end up getting a career in multifamily maintenance. And then he joined Bridge Property management, where his work ethic quickly stood out and he got multiple promotions within his first year. So then he encouraged his brother Seymar to join Entryway as well. And after graduating high school last year, Seymar completed certifications through the program and launched his own multifamily career with Tri Bridge Residential. And now both brothers are thriving with stable careers, renewed confidence and real optimism about the future. So good reminder that apartment industry is not just about providing housing, but it's also jobs for people, for good people who need jobs and provide a critical service for the people who live in those apartments. All right, let's get back to our rental housing trivia question of the week sponsored by Foxen. We asked you which submarket started construction on the most apartment units over the past 12 months. Was it Brooklyn, Bradenton, Frisco, Jersey City, or South Bay? If you said D, Jersey City, give yourself a pat on the back because you got it right. Jersey City started more than 7,000 units over the last 12 months. That's more than double any other submarket in the U.S. much of that started in the second half of 2025, prior to the mayoral election that I spoke about earlier, which was won by one in a runoff by a candidate who wants to curb development development incentives for new apartments. Hence, I assume, hence the rush to get a lot of projects breaking ground prior to any changes in that program. So that's part of the story there, as well as just the demand tailwinds in that area. Next up, it's time for today's interview, sponsored by funnel, the AI and CRM software trusted by four of the six major REITs and many more leading operators like BH and Cortland. To learn how Funnel can help your properties centralize operations and automate everyday tasks, visit funnelleleasing.com okay, so our interview today is a unique one. It was recorded recently at a live event at the historic Rialto Theater in in Raleigh, North Carolina, hosted by my friends at Graysteel. So big shout out to Wesley Fricks and the Graysteel team for hosting me. You know, it's always fun taking the Rent Roll podcast on the road. We've done it a few times now and hope to do it again in the future when you have events that where where that's a good fit. But anyway, joining me on stage at the Rialto in today's interview is Rob Reed, who heads up the residential business for Kane Realty. And if you don't know Kane, they're the big name in Raleigh for Place making beautiful master plan developments across Raleigh. We're going to talk to Rob about how Kane approaches place making, how they make it work, what has worked really well and what might be replicated elsewhere. And also of course, how apartments best fit within these mixed use development, what value being part of these mixed use developments brings to the apartment also. So let's jump in.
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All right, we are here for our
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third ever live recording of the Rank World podcast and I am honored to be joined in person by Rob Reed from Kane Realty. So Rob, thank you so much for being here and thank you all of you for being part of this event. Are you excited?
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Thank you so much for having me back.
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You're a great crowd. All right, so Rob, before we get into the talk about placement, really our theme for today, tell us about yourself and specifically how did you get into the wonderful world of multifamily.
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Yeah. So I am a North Carolina native. I was born in Hickory, North Carolina, but I mainly grew up in Philadelphia and graduated from Wake Forest University and started out my career in investment banking. Did about a five year sabbatical up in Washington D.C. in the political and public policy realm and got out of that at just the right time. And as I was transitioning out of that world, really leaned into a lot of my mentors and, and was asking them, you know, I want to leverage what I learned in investment banking and the technical skills that I built there, but I also really want to be in a space that leans into a lot of my favorite things about politics and public policy, which was economic development and community building. And they all sort of looked at me and said, well, that's virtual real estate. But so I started out working in Charlotte for a boutique commercial mortgage banking firm, Metalist Capital, was there for about three to four years and then was fortunate enough to join Kane Realty about eight years ago.
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Great. And I know many folks here are very familiar with Kane Realty, but especially for those who may, a few who may not, but also for those listening who aren't familiar with, with, with Kane, tell us a little bit about, about, about your company.
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Yeah, sure. Cain's been in business for over four years now. John K. Founded the company back in the late 70s and really started out as a, as a retail developer and did a lot of grocery anchored shopping centers, sold off a large number of assets in the late 90s and then set out on a mission to really bring vertically and horizontally integrated mixed use to Raleigh. So he acquired the North Hills Mall, which at one point was the large Mall between Atlanta and D.C. back in the early 2000s, redeveloped most of them. All the JCPenney space still had a number of years remaining on its lease term into what it is today, which is a pedestrian friendly, open air lifestyle center. And then as the success of that was really materialized, starting to expand North Hills into the last year district, park district and now the innovation district.
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Yeah, that's great. And so again for those listening are not familiar with this North Hills development, you know, as I understand early Kane's first jump into place making and live work play concept, everybody talks about live work play, but you know, y' all have done that, especially with this deal. And, and so I Show you about 3,000 residential units. 2 million square foot of office, one 1.2 million square feet of retail. Tell us a little bit more about. You talk about some of the history, but tell us a little more about what, what, what's entailed or what people would see if they were to come tour this property.
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C
Yeah, yeah. So North Hills is a very vibrant community. Like I said, there's a lot of density there to the, at this point that's been phased in over many years and, and we still have more growth that we're excited about in years to come. But you know, I think the beauty of North Hills is one, we have a fantastic team that approaches these projects with a lot of intentionality and they really focus on the space in between the buildings. And there's a lot of things that go into the design, whether it be wider sidewalks or marrying the landscape and the hardscape together in really thoughtful and intentional ways. But there's also the events and activations. So we have an in house events team that puts on, you know, roughly two to 300 events per year in North Hills. It draws a lot of people into the community. There's also the merchandising focus. And so we, you know, in any kind of mixed use multifamily project with ground floor retail, you know, the vertical element is anywhere between 6 to 778 of the NMI. And so a lot of mixed use developers really sort of treat ground floor as something that, you know, isn't the, the crux of the income and therefore it can be an afterthought. Whereas reo's work with the script on that and really try to be very thoughtful about that merchandising mix not just for the tenants themselves, but also for the end user. And I think what that creates is a lot of stickiness in the community. We see that in all of our retention Rates and renewal rates, whether it be office, retail or multifamily. Because it creates the sense of place that people feel attached to, that people really get drawn into. And that just affords us the ability to do what we're doing.
- [39:16]
B
Yeah. So let's break down something you just mentioned. So you mentioned the events. So talk a little about it's a full time team doing this. You said what Twitter events. Two to three, two events a year. And so talk to us about the range of events. Imagine that number. There's going to be some big ones
- [39:32]
C
and some small ones.
- [39:33]
B
And what does that look like?
- [39:34]
A
How does it work?
- [39:34]
C
Yeah, I mean it ranges everything from wellness Wednesday type events where they'll do some group fitness classes in some of the common spaces, up to a farmer's market every Saturday and bring in a lot of local merchants and people from our agriculture community to sell goods and services and up to, you know, concert series. We're very well known for our beach music series that brings in, you know, roughly 4,000 people per event. And so it's an exciting addition to the community. It really creates just a very vibrant place for people to come and bring their kids and their families and really just enjoy all the things that North Hills has to offer. Whether you live there or work there or not.
- [40:21]
B
Well, some other ways that you, you really make bring vibrancy to development like this. And you know, I, I, I remember talking to a tech is mixed use developer one time who said, you know, too many people focus too much on just maximizing revenue per square foot and not about actually building a place you'll want to come to. And so talk to us about some of the things that, that you are doing at this site and others that really make it a site which in turn has a multiplier effect on the value of property.
- [40:48]
C
Yeah, well, I mean, you know, a lot of it is just the experience that you have when you get there. So there's a number of things. One, we have our own property services division within Kangaroo that has a public safety division. And so we have very visible presence for security. And our public safety officers are more than just security officers. They're really ambassadors for the community. And so that creates a sense of welcome this in the space. You know, our property management teams are fantastic and we take a non traditional approach to hiring. We hire first for character and second for ability and third for experience. And so, you know, we really seek out people who have that service minded sense of integrity. And so everything down from our tenant services coordinators and our Office buildings to again our public safety ambassadors, to our residential property managers. You know, we, we try to create a sense of, you know, everybody is welcome here and certainly the physical space itself is very elevated and very nice. Again I mentioned, you know, we pay a lot of attention to Hardscape. It's a way finding to parking. You know, a lot of the stuff that, that you know, sort of goes on behind the scenes. Our team spends a lot of time thinking on that to ensure that when you come to one of our communities, it's easy to find, it's easy to navigate. When you, you know, get up at the ground level or the main street level, you know, there's people, both people employed by the asset, but also just a lot of people that you're going to know from your neighborhoods and your schools and also all that. And so, you know, it's a, it's a unique place that is really the product of 40 years of vision development.
- [42:47]
B
And so you mentioned me earlier, Makers Alley.
- [42:50]
C
Yeah, talk about that. Yeah. So we have a, one of the assets in our North Hills innovation district is apartment community called Channel House. And at the ground floor of that is a place called Maker's Alley and Makers Alley, I mentioned the farmers market earlier. They're, you know, there's a number of previous vendors for part of the farmer's market. There's a particular local coffee shop here in town that everybody knows and loves. And they started out, you know, as a bakery selling pastries and other bread within the farmer's market. And you know, just like many local operators and homegrown operators, they often get priced out of a lot of this class A retail space. And so they ended up going to another location. They're still a business, very successful operator. But it left us with this feeling that where, you know, we don't have a place to really capture, you know, that unique story and that story that is very inspiring to a lot of people. And so at Baker's Alley what we did was we, we whitebox all space and so we took a non traditional bridge for retail to be able to service tenants where this is often, you know, kind of their, their first brick and mortar. And so they're, you know, it's, it's flexible lease terms, not a lot of ti required and we've got some amazing operators over there and it has really, really been a, an amazing way to draw people into an hiv. And we're about to open standard food and beverage, about to open bench warmers as well. We've just completed a lot of construction around some of the bridges that go over some of the stream reservation that we did. And so it's just a really unique place within an urban setting that both, you know, from the physical design of the space down to the businesses that operate there, I think it just tells a really cool story that people connect to.
- [44:57]
B
Absolutely. Now let's, let's bring this home. The residential space, obviously it's the ramp. So you're head of residential at Kane. So what talk to us about like what is when you, when you do place making, right.
- [45:10]
A
What value does that add these apartment
- [45:12]
B
properties and what impact do you see to, to your rental?
- [45:16]
C
Yeah, yeah, well, I mean, you know, one of the big things that screams health pages is retention. And so we, you know, you talked about the increase in retention that you're seeing nationally. We certainly feel that in our portfolio. We've always felt that in our portfolio it has tick up, you know, post Covid. But I think it's also, it's, it sells a lifestyle more than anything. And so I think, you know, a good example of this was, was one of our downtown assets. Not to focus solely on North Hills, but one of our downtown assets, Smoky Hollow. And so, you know, Smoky Hollow, the first phase was Peace Rally apartments that we have since sold to Portland. So it's now bring to Courtlandville itself. But piece was 417 units. The line which was phase two was 283 units. Both of them delivered in the thick of COVID Both of them leased up in really, really impressive amounts of time. Line leased up in roughly eight to nine months. And what was unique about those two assets is they were great, you know, multifamily product. But Keese at the ground floor had the first a major grocery chain in downtown R.A. which is kind of hard for a lot of people to believe. But you know, if you lived anywhere in downtown, the closest grocery store that you could go to have been Harris here at Village District or you know, really kind of out of town. And so you always had a 5 or 10 to 15 minute drive to get to the closest grocery store. So we were able to bring Publix in. And then across the street at Line, we kind of flip the retail strategy on its head where you know, the front door of a lot of the retailers are actually inside, you know, an attractive sort of courtyard space. And we've got some fantastic restaurants there, some fantastic service oriented retailers there. And so it's been interesting to sort of see how the demographics of those two communities really played out. You Know the line really catered to that younger, you know, young professional, transient type renter that really wanted the more exciting nightlife and stuff. Whereas Peace really catered to the older renter, a little bit more affluent, a little bit more practical with gracious shore downstairs. But it also offered the best of both worlds for everybody. I mean to walk from the line to the Publix is know a five minute walk if that, to walk from Peace over to Madre at Smokey Hollow is less than a two minute walk. So, so I think it just sort of, it allows a lot of optionality for folks and, and, and creates a place where you know, you really don't have to leave very far from your home to get everything you need when you come up more.
- [48:27]
B
Yeah, so, so just think about when you're as a developer, when you're building apartments, I assume there's going to be a value associated with delivering the amenities
- [48:35]
A
like a grocery store.
- [48:36]
B
You'll need to want to live there.
- [48:38]
A
Right.
- [48:39]
B
So how, how many of these developments, mixed use developments have this game now. Now, now built.
- [48:45]
C
Well, we currently own roughly 2800 units and we manage another 3900 units. Let's see. Gosh, I've got to think through the history of everything. So it's a very interesting story is the first, the first multifamily project that we did was back in the mid 2000s. It was the Alexa North Hills Now Club last year at North Hills and it was joint Metro DCR at the time. And it was actually the first conditional corridor asset in all of ra which is kind of shocking to think about, but I think it speaks to just how much Raleigh has grown over these past 20 years. And so we started with that project and then we went across the street to the park District and built Parker Market, Midtown Green, Dartmouth Park, Central Eastern. And then I've done some downtown projects currently we have a lot of, we have a project in lease up or two projects in lease up just south of downtown. We're about to open a third one now. So it's been a, it's been a fun ride for us and we're really excited. We have a very robust pipeline and excited to bring more, more fun product to the market. Absolutely.
- [50:06]
B
So for those listening, you know we've seen a lot of cities across the US that a lot of cities want to force, force mixed use development to say if you want to build residentials great, but you gotta build ground floor retail. We've seen, everyone's seen examples.
- [50:19]
A
That's not work.
- [50:20]
B
So Tell us like from, from Kane's experience, like what, what do you need to find a site that really works to build a really desirable live work clay where the residential is going to work because you have the other components help support it?
- [50:35]
C
Yeah, I mean I think you, you really look at it through a lot of traditional retail lenses. You know, access, you know, traffic counts, visibility, broader demographics. But I think, I think the bigger thing for us is less on. I mean the site is obviously critically important, but it's the execution and it's the alignment between the teams within Caine that really specialize and service those, those particular uses. I mean I spend a lot of time with our retail team, a lot of time with our office team and you know, and, and certainly the level of office density and there's not a lot of owners who are happy to be owning office right now. We, we've been very, very fortunate with our office portfolio and, and I think that's really provided a lot of synergies with the other two uses as well. Um, so, you know, I think it's, I don't have a specific, you know, sort of silver bullet for you other than I think a lot of it is just about thoughtfulness, intentionality, vision, you know, not being afraid to pioneer and underwrite beyond the immediate concept too and have conviction in your vista.
- [51:57]
B
So when you all look at a site, do you build a master plan first, then you start with retail and
- [52:02]
A
then add apartments later?
- [52:04]
B
Like what's typically the process?
- [52:06]
C
Yeah, sure, we're, I mean, you know, we've been doing this for a while now and so a lot of the projects that we look at, you know, are very, from the front end, intentionally master planned. Now obviously over the past five years they have put approach to that has changed a little bit with COVID and the impacts that it's had on the office market. And so, you know, it remains in flux but, but at the same time, I think every opportunity that we're looking at, we're looking at it very equally through all three of those lenses, you know, because we just see them as, as really organic systems, you know, that all need to work together. And so you know, if you're trying to charge, you know, top of the market retail rents, but you actually think that you're only going to be a longer. Right. You know, a buck 75 in. In the multifamily side, it's probably not going to work altogether, you know, and, and you're probably not going to be able to just simply drive, you know, your, your multifamily rents up to 250 a foot. Just because you have a good restaurant on the ground floor, you have good service industry, it really needs to be that there's concert between the two fundamentals.
- [53:27]
B
On the design side, they have a good design team. If you look at what you've done that's been successful, you look at other stuff that maybe others have done and not been successful, what are the characteristics of a design that really makes place making work versus what doesn't work?
- [53:42]
C
Yeah, I mean, some of it is like I mentioned earlier, you know, wider sidewalks, elevated hardscape, elevated landscape, you know, really efficient and attractive wayfinding so that people in creative wayfinding so that people know that. You know, I think also too, and Smokey Hollow is a great example of this, our design team does a great job of really leaning into the history and the character of the site itself. So for folks in the audience, they have probably heard this story many times, but Smokey Hollow really actually sits on the land that back many years ago, back in the 40s and 50s, housed a lot of the people who really built our city, a lot of the tradesmen. It sits right beneath the train line. And as the train would come and the coal fired smoke would sort of billow down into it, it was quite literally called Smokey Hollow. And so our design team was very intentional. Obviously it's called the line because it's close to a train line. And as you go in there, there's a number of odes to that design or to that theme embedded in the design. And so I think we pride ourselves on not just being a commoditized approach. You know, we, and this is not against anybody, but there's a lot of apartment developers that are really, you know, pushing towards like identifiable brains. And that's great. And, and for many of them and for many renters, that can be comforting to know. You know, you know that if you go to pick your major REIT or national developer that if you go to one of those properties, there's an expectation of standard. You know, we've just sort of taken the approach that like people really like authenticity and people really like a sense of uniqueness. And Josie Reeves and our is our head of design and her team just do a, a fantastic job at that.
- [55:45]
B
Talk to us a little about your land strategy. Like, do you, do you have sites you been holding for a long time? Are you actively buying land and do you try to hold on to it, kind of figure out the plans for it later and like tell us how that process works.
- [55:59]
C
Yeah, yeah. I mean, it's a mix of everything. You know, we certainly have, have sites that we've held on to for quite a while and that we're being patient with to make sure that it's the right time, the right opportunity and that we're not, you know, cannibalizing some of our other projects in the pipeline or some of our other deliveries. You know, we've had opportunities that were moving fast on. You know, a good example of that is, you know, we just bought a piece of land that's roughly 28 acres in North Hills that we're expanding the North Hills Innovation District into. And just given the excitement around NHID and the opportunity that's in front of us on that one, you know, we're trying to move very fast and you trying to really complete, you know, one of the last puzzle pieces of North Hills to deliver the, the flywheel effect and the synergies that that level of density and the complementary uses can provide.
- [57:02]
B
So in, even in today's tough environment, obviously rents are negative. You have high concessions, not deeply negative. You have some, you have, you do have a lot of concessions, a lot of supplies been delivering. Is it still an environment you can make some of these deals work?
- [57:16]
C
Yeah, absolutely. Yeah. I mean, it's, it's difficult. Every developer is facing this, but we've been very fortunate. You know, we're about to deliver a project just out the downtown. It's the phase two of our West End district called Alderman Worth that'll be opening here in the next several months. We're under construction on a high rise asset in North Hills called the Strand that we capitalized last year. And so obviously not a, not a great environment to be trying to capitalize high rise multifamily. But we were able to get it done and took a while, but it was, we're excited about that. And then we also just broke ground on tributary in the North Hills Innovation District as well. So we've been fortunate that we've had some great partners that believe in our vision, believe in our story, and have allowed us to continue the momentum despite plenty of headwinds.
- [58:11]
B
And so what are the tailwinds to make this work right now? Is it just they, you know, great land basis? Is it like a long term role strategy? You kind of ride out a couple of years. We know it's going to be soft.
- [58:20]
A
I mean, what's the profile that makes these twos work?
- [58:22]
C
Yeah, I think it's, it's gray land basis on certain assets. And I think it's also too just the actual operating performance. I mean again I mentioned, we know we have a robust management platform. We managed about 6,700 units. It's about 40% owned assets and about 60% third party assets. And so, you know, we have a lot of data at our disposal, you know, and, and our portfolio is very much concentrated in this area. And so, you know, we can speak to. And, and most of our assets have been pioneer. All the assets that we've delivered over the course of our history were continually pushing the market and rents and stuff. And so every single deal that we've capitalized and delivered, you know, we got the pushback that, well, I'm looking at this property and this competitive property and stuff and you're projecting the rents are 20% higher. So we've been fortunate. We've established a track record of actually delivering on our promise. And then I think it's also too just the mixed use nature of it and the successful execution of that live workplace dynamic that gets people excited and they see the vibrancy and the density and the migration of people coming in there and that's backed up by actual fundamentals that, you know, may not always tie to the underwriting, you know, to a T, but they're willing to take that back given our track record, our history and given the, the attractiveness of our sites.
- [60:07]
B
One more question before I let you go. You're adding to some of your existing mixed use sites right now. You talked about that. But what's next for K? Like when are we going to, when and where are we going to see the next big place making mixed use to development from Camilty?
- [60:22]
C
Well, yeah, I think, I think our, a big piece of our focus right now is on that North Hills Innovation District expansion. You know, obviously there's. We, we have a big project south of downtown called Downtown south that has been many years in the making and, and we're excited to get moving on that here soon. You know, it's a very large scale project involving a lot of different parties. And, and so, you know, the, the nature of the design of that and of the programming of that is constantly evolving. But, but I think that's going to be one of the next, you know, marquee projects for us. And, and then there's, there's plenty of other things that we're proactively looking at and hopefully look at in the future.
- [61:11]
B
Well, Rob, thank you so much for doing this and thank you all for joining. Please, please join me in thanking Rob.
- [61:36]
C
Foreign.
- [61:42]
A
That's a wrap on episode number 85 of the rent Roll. Big thank you to Rob for being our guest today. Thank you, my friends at Grace Deal for hosting us. Thank you also to JPI Madera Funnel, Hawthorne Residential, Authentic Foxen Grotto, AI and Apartment Life. Thank you to all of you for spending part of your day with us.
- [62:02]
C
We'll see you next time, Sam.