On the House: Rental development is picking up

onthehouse-
Developer John Westrum is building 275 rental apartments in Brewerytown. He calls rental a good bet.

I don't think I'd be breaking any new ground if I said there seems to be a lot of multifamily - read that, rental - development underway here and elsewhere.

There are a number of reasons for this.

First is that lenders, scalded when the for-sale market nosedived in 2007, saw a shift from buyers to renters in the next several years and decided that apartments were the places to put their money.

It was not an overnight decision, banks being what they are.

Developer Carl Dranoff, who was moving 777 S. Broad Street from drawing board to foundation in 2009, has said that he had to put more of his own money into that ultimately very successful luxury rental project, which this spring begat SouthStar Lofts, a few blocks north at Broad and South.

Yet the spigot for financing, especially for developers with proven track records, has been turned on for multifamily - especially in central business districts and adjacent neighborhoods - and there seems to be no stop.

In fact, predictions were that this multifamily focus would continue even into the "next housing cycle," as Jeffrey Otteau, of the Otteau Valuation Group in New Brunswick, told Philadelphia home builders at a meeting in October 2009.

He was right.

Otteau did not predict when that next cycle would occur, which was a wise move considering that a recovery date failed to materialize when the experts tried to predict it.

Another reason for continued multifamily development is that millennials seem wary of buying houses.

Stephanie Karol, of IHS Global Insight in Lexington, Mass., said the amount of a monthly mortgage payment has risen by more than $100 since last year, "which is fine for a young couple with two incomes, good credit, and little to no debt, but if a buyer lacks any one of these characteristics, it will change their ability to purchase."

Developer John Westrum agrees that rental is a good bet.

He and I were discussing Upper Dublin for a Town by Town article I was writing for a recent Sunday Business section - Westrum and his father built a lot of houses there.

Our conversation turned to the city. I remember when Fort Washington-based Westrum entered Philadelphia via Upper Roxborough - Spring Lane Meadows in 1999.

That venture morphed into Packer Park, Brewerytown, East Falls, and Somerton.

Brewerytown and East Falls were ready for market as the housing downturn took hold, and after some early movement, sales fell off quickly, Westrum said.

In Brewerytown, "we had 144 stacked townhouses with attached garages in the first phase, and we were hitting it out of the park with 72 sales the first year [2005], then 36, 18, and nine, and finally had to auction the last five [2009]," he said. Plans for 300 more were mothballed.

Westrum wasn't going to walk away from approved land, so he bided his time, waiting "for other investors to come in and build back the market."

They did. He broke ground May 2 for the first phase - 64 units - of what will be 275 luxury rental apartments on four remaining parcels for 31 Brewerytown, at 31st and Thompson Streets, between Brewerytown Square and the new Dollar Foods.

Rents for the one- to two-bedroom units - 600 to 1,100 square feet with parking - will likely range from $1,200 to $1,800 a month.

"The city is on fire," Westrum said.

 


aheavens@phillynews.com

215-854-2472 @alheavens