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HomeMy WebLinkAboutLetter #26 John Reinhardt - Overlook HOAThe Overlook HOA Board Evaluation of the Advenir Oakley Capital Proposed Development at The Legacy And Conclusions The Overlook HOA Board (Board) was not familiar with current Build To Rent (B2R) concepts, nor the current state of growth in this real estate segment. We were not familiar with Advenir Oakley Capital (AOC). We had a very general understanding of the existing Legacy PUD zoning. And we shared many of the concerns of Legacy residents regarding increased traffic, overloading of schools, and impact on community services. The Board decided to study all of the above.. The Board has five members. Two members have 30 - 40 year careers as senior executives in real estate related segments, one, in real estate finance and the other in developer services. Another member is an attorney and partner in an Indianapolis law firm. The fourth is a business owner in the medical services field and the fifth works for a major pharmaceutical company. The Board’s research spanned a wide range of sources and represents 65 - 75 hours of effort. Listed below are some, but not all, of the sources: ●Extensive internet search efforts to locate information on the B2R industry, key companies, studies, articles, market segments, growth potential, occupancy rates, etc. Specific efforts to learn about AOC and its existing properties, quality and performance. Specific efforts to learn about Carmel zoning, city planning and community services. ●Contact with The Urban Land Institute (ULI), a not for profit, independent think tank located in Washington D.C. with 45,000 members in 81 countries. This is a world class think tank with membership from all segments of community development, land planning professionals, elected public officials, municipal government, developers and institutions of higher education. ●Contact with industry trade associations in the apartment and home building industry. ●Contact with a former business associate that holds a PhD from Cornell University in City and Regional Planning and was the department head of Urban and Regional Planning at the University of Oregon for 13 years before starting his own business. ●Contact with a local apartment developer and a major HVAC and Plumbing contractor that generates a large portion of their revenues from the apartment, condominium and housing sector. ●Contact with Hamilton County and Carmel City employees. ●Several hours of phone contact with David Oakley of AOC. ●Several hours of phone contact with Jim Shinaver of Nelson & Frankenberger, LLC ●Contributions of knowledge and experience from the Board The Board chose not to tap into the extensive knowledge bases of two Overlook residents because of potential conflicts of interest or perceived bias. One is currently in City government and the second is a representative of The Legacy developer. After collecting and evaluating all of the data and information, the Board and those residents in The Overlook who expressed a concern or an interest to know more about the proposed AOC project,reached the following conclusion: The proposed changes in The Legacy PUD Zoning and AOC’s B2R project are a superior alternative to what can be built under the existing Legacy PUD Zoning. The impact from traffic will be more severe under existing Legacy PUD Zoning. The impact for schools and city services is about the same under both scenarios. The City of Carmel has planned for this growth since 2006 when The Legacy PUD was approved. Carmel elementary schools are currently 1000 students under capacity. The Board supports passage of the proposed zoning changes and approval of the AOC project. Supporting information follows: The Build to Rent Industry (B2R) ●B2R crosses the line between two major housing segments - apartments and single family residential housing. ●B2R is considered a major, “hot” growth segment in the U.S. Real Estate Industry ●Availability of quality apartment rentals is at an all time low. Most quality local apartment complexes are operating at near maximum occupancy rates. ●With the current rate of inflation, rates at 6.7% for a 30 year fixed mortgage and going up, plus the high costs of residential housing, a significant portion of the market that would like to buy a home no longer qualifies for a mortgage nor can they afford a home and the associated costs of home ownership. ●B2R meets the needs of a growing market segment that can’t buy a house and doesn’t want to continue living in a traditional apartment setting. B2R also meets the needs of another growing market segment that wants to sell their home and isn’t ready for a retirement community and finds traditional apartment living to confining. ●The B2R industry is currently divided into three segments.The first two segments are similar and have grown out of the residential, single family home market. The third segment is the newest and is a hybrid from residential housing and the apartment industry. ●The first and oldest segment is dominated by Wall Street Asset Management Companies and the business model is relatively simple, to buy all the single family homes possible in a defined area or community (usually a city or large urban area), place them under a local or common management company, and then dispose of the assets when a predetermined financial goal is reached or markets change and other assets become more alluring. Management and maintenance of these homes is difficult because they are widely dispersed within a city or urban area. It is difficult to establish a uniformed standard of quality across a diverse number and style of homes ●The second segment is a joint effort between the Asset Management Companies and other major players, with national home building companies such as Toll Brothers and Lennar. In this segment, the B2R companies buy entire subdivisions or communities from the national builder for rental purposes. Rental, management and maintenance of these homes is significantly easier than what is found in segment 1. This is a relatively new segment and has not reached maturity yet. ●Segment three is the newest segment and offers a major refinement to the B2R product mix. It is currently dominated by small private equity companies. Typical investments are made by individuals in the $100,000 to $1 million range. This B2R product features freestanding and multi-family residences specifically designed, scaled and integrated into a rental / apartment community. All the rental units feature upscale finishes and appliances, quality construction and an extensive amenity package not found in a traditional apartment complex. These projects usually have an onsite management team of 6 - 10 people to handle rentals, building maintenance, landscaping, trash removal, community events and classes, etc. Several of the companies in this segment are intent on establishing themselves as a branded product. Advenir Oakley Capital, LLC (AOC) ●AOC is a recently formed joint venture between two successful companies in this segment. The Advenir side of this joint venture is based in Miami, FL and is owned by two brothers, Steve and David Vecchitio. The Oakley side is owned by David Oakley and is based in Birmingham, AL. The Oakley Group is in charge of expanding, building and operating the type of projects described in B2R segment 3 above. It is intent on establishing a brand under the LEO name. ●AOC’s websites proved somewhat confusing in understanding the joint venture. They have yet to be updated and fully integrated. Visiting the two websites below will help understand the two firms' history and direction. ○advenir.net ○oakleygroup.com ●AOC-Oakley is a private equity firm, as previously described, with individual investors making commitments typically below one million dollars. They have two completed, operational, and leased LEO branded projects one in Savannah, GA and the other in Augusta, GA. Several more are under construction and in the planning stages. Other sites are in the active acquisition phase, such as the one in The Legacy. All sites will be marketed under the LEO brand, will follow a common theme, have the same quality standards, large amenity components and will be scaled to meet specific site requirements.. ●Google LEO at the Sanctuary and LEO at Augusta Commons and you will find the project site and other apartment rental sites that will give the viewer a full understanding of what a completed and operational LEO branded project looks like, extend of the amenity packages, management staff, activities, rental rates, unit availability, owner reviews, etc. ●The Board found David Oakley to be highly professional and willing to answer the myriad of questions posed to him during several hours of phone conversations. (He even answers his own phone).The Board found the Oakley Group team to be a highly motivated group of young professionals who has a strong belief in what it is creating and is intent on providing an enhanced rental living experience. ●The Board supports David Oakley and his team and believe they will produce a quality project within The Legacy. Summary Review And Comparison Of Requested Zoning Changes vs. Existing Legacy PUD Zoning ●AOC is proposing to change zoning in three use blocks of the existing Legacy PUD. The area is approximately 32 acres and is bordered to the north by 146th St., to the east by Community Dr., to the south by Equality Blvd., James Dean Dr., and Sunstone Place, and to the west by a portion of The Ridge subdivision with a common area as a buffer. ●The proposed Legacy PUD zoning changes would accommodate AOC’s proposed project as follows: ○Approximately 350 “for rent” detached and attached dwellings, including three muli-story apartment buildings facing Community Dr. and the existing J.C. Hart apartment complex, along with a 2 acre commercial / retail parcel at the corner of 146th St. and Community Dr. ○All cottages and amenities occupying the majority of the 32 acre parcel will be a maximum of 1 or 2 stories in height. The 3 proposed apartment buildings along Community Dr. can be 4 stories in height. ○The proposal does not include general office uses, residential Lofts over retail or offices, parking garage structures and other currently permitted uses within the 32 acres in question. ○The proposed amendment does require AOC to construct their own pool, clubhouse and amenities. And AOC residents will not be allowed to access The Legacy PUD amenities. ●The Existing Legacy PUD Zoning allows, without amendment, the following: ○The building of 315 dwelling (rental) units, as much as 330,000 square feet of office / retail space, and multi-story garage structures. ○The minimum structure height is 2 stories and the maximum structure height throughout the 32 acre parcel is 5 stories. ○Setback requirements are minimal throughout the 32 acre parcel ●Detail and Observations: ○Existing Legacy PUD Zoning allows a much more densely developed 32 acres than the AOC proposal. ○The existing office / retail component at The Legacy after four plus years remains only partially leased. One restaurant failed and another never opened. The mix of current tenants is less than stellar. Out-parcels remain available. Amazon changed the way we shop. Covid changed where and how we work. The supply chain shortages and disruptions have impacted every business in America, and the labor shortage makes it increasingly more difficult to operate a small business profitably. Add in the current rate of inflation and you have a very difficult environment for small businesses to survive. The existing office / retail component at The Legacy should be sufficient to serve our needs in the future. ○Several owners in The Ridge subdivision could be looking up at 5 story retail / office and rental unit buildings, or down on 1 and 2 story residences masked by landscaping and common area separation under the AOC proposal. ○Both scenarios will generate about the same amount of additional residential traffic through The Legacy. However the office and retail components of the existing Legacy PUD Zoning will add a large additional component of non-resident traffic to the equation. ○Both scenarios will introduce approximately the same number of school age children to the Carmel Clay school system. Carmel Clay schools indicate they are running under capacity by 1000 students and can absorb the inflow from a 315 - 350 unit rental / apartment project. It was also noted that the number of school age children per unit living in a rental / apartment project is lower than the number of students, per unit in a traditional single family residential subdivision. Carmel High School sees no problem with absorbing this increase in students. ■It should also be noted that the Carmel Clay School System plugged the impact of student growth from The Legacy PUD into their planning matrix back in 2006 when The Legacy PUD was approved by the City of Carmel, and has been updating those projections periodically ever since ○The Legacy has a growing traffic problem that can only be partially corrected by the City of Carmel with increased enforcement of traffic laws, additional signage, restrictive traffic measures, etc. The existing Legacy PUD Zoning will add more cars to the issue than the proposed rezoning by AOC. ■The overall “macro” traffic problem we face is only going to grow as traffic increases on Allisonville Rd., River Rd. and 146th St. and as development continues along both sides of 146th St from I-69 to Meridian St. Add in the Conner Prairie expansion, and we are going to experience massive traffic issues and, eventually, as the problem is addressed massive, road construction issues. It will take the joint efforts of Carmel, Fishers, Noblesville, Westfield and probably Hamilton County and The State to correct this problem. It will take a long time to correct this problem, and the Board sees this as the major issue facing the entire area surrounding The Legacy. ■The development of the 32 acres in question is only a small part of the overall problem, but still a thorn in the side of Legacy residents. ○The City of Carmel can no longer expand by annexation. Its future growth will come from higher density projects on undeveloped parcels or via redevelopment of areas like Home Place, that will include higher density components. ■The City of Carmel has incurred a significant debt load to provide us with the incredible array of facilities, services and lifestyle that we all enjoy. Expansion must continue to pay this debt down or those of us already living in Carmel will experience a heavy increase in tax rates over time. ■Not developing the 32 acres in question is not an option for the Legacy Developer or the City of Carmel. ■Rezoning the 32 acres as single family residential may not even be possible, but if it were rezoned as such, it would not be economically feasible based on the current value of the 32 acres in question. Additionally, putting a limited number (80 or less) of very expensive homes fronted on a major thoroughfare and surrounded by office / retail, apartments, a daycare and townhomes violates every planning principle in PUD design. They simply would not sell. ○Carmel City Services (fire and police primarily) also plugged in planning numbers when the Legacy PUD was approved in 2006, and is well equipped to handle current Carmel growth projections. When all of the above was taken into consideration, the Board decided to support the proposed Legacy PUD zoning changes and the building of a quality B2R community at The Legacy by AOC.