Municipal and Commercial Participation
The developer has a different primary stakeholder in this equation compared to traditional multifamily projects , providing a unique and incredible financial opportunity . Whether a municipal or industrial ‘ partner ’, the values of this new stakeholder are complementary to the Developer and are a welcome addition to the project equation . This new stakeholder also has a longer view of the outcome , desiring utility and service for decades , postcompletion . A typical speculative project , in contrast , is required to meet a onedimensional proforma with the singular goal of serving the highestpaying resident and doing so as efficiently as possible ( i . e . as low as possible upfront cost ). Both the developer and the equity investor of the typical spec ’ multifamily project are often seeking to retire their position as quickly as possible .
With the workforce project , often the industrial partner desires to control the project for as long as possible , gaining confidence in the knowledge of the quantity and status of housing it will have available , as the business needs grow .
What is compelling is that the demand side of the equation is also a participant in the financing component . The end user and their longterm goals are part of the industrial partner ’ s business model . Numerous avenues exist for these municipal and industrial partners to participate , and earn a favorable return on their investment , including :
1 . Providing equity or lowerinterest mezzanine loans ,
2 . Bringing some or all of the demand via various avenues , such as a . Providing a rent credit to the employee for the subject property . b . Directing employees to the project leasing agent . c . Providing a rent guaranty to the Developer to assist in achieving favorable financing terms , in turn , lowering costs .
By supporting the financing of the project , employers generate a monetary ( cashoncash ) as well as a longterm growth return on their investment . Industrial and municipal investors gain the following :
1 . Control of available housing for their employees .
2 . Certainty of the quantity and types ( for sale , forrent ) and program i . e . 2bedroom , 3bedroom units , etc .
3 . Certainty of the cost of housing at present and into the future .
4 . Monetary return on the investment through cashflows and / or at disposition .
Many decisions about workforce housing will depend on site selection , unit mix , rental and sales rates .
As an Investment
The investor who would realize the highest value in workforce housing is a company or municipality that will derive an economic benefit from a happy , stable and secure workforce . The investment will boost the company or municipality value , while simultaneously creating a measurable economic return on the monetary investment over time .
As suggested above , workforce housing is a longerterm investment and generally not designed for an immediate exit , although in certain environments ( physical and monetary ), it could be possible to sell the asset or position after stabilization .
Additional Considerations
It should be noted that large employers have some leverage with municipalities and can assist in securing things such as development impact fee reductions or offsets , utility connection cost reductions , and assistance with infrastructure engineering and costs .
Developers can operate a single , or multiple employers ’ projects in a fund across several markets they may be operating in , creating a larger entity to create even further cost reductions in financing , administration , and execution costs . This format also renders the asset pool to be more stable and flexible as market performance fluctuates over time .
A content workforce is good for any company ’ s bottom line and few things contribute to this more than providing a happy place to call home .
MEET WILLIAM MOORE
William Moore , AIA , is President of Portmanteau Partners ( www . portmanteaupartners . com ), a firm specializing in the design and development of workforce housing . The firm is currently working on the $ 40 million workforce housing project for meatpacking giant Cargill , Inc . in Fort Morgan , Colorado .
65