Interview conducted and condensed by VIVIAN MARINO
Q UDR has been moving into Manhattan in a big way.
A It’s part of our long-term growth strategy. Manhattan has a lot of the attributes I’m looking for in a market: Over 70 percent of the people rent; housing is not very affordable; it has a large cohort of 20- to 35-year olds; and lastly, there are a lot of value-created opportunities.
All four of our acquisitions have similar characteristics — they’re well occupied but operating below optimal level. Rents are below market, and expenses are above. We saw in all four an opportunity to enhance the quality of the community. We actually redevelop these properties. And then we raise the rent.
Q Have you done much work on these buildings yet?
A In 10 Hanover we certainly have. Physically it’s been hallways and interiors. And we’re modifying at the service level. We have an electronic platform that lets residents do business with us 24/7 on any device: pay rent, renew a lease, have anything fixed.
We’re in the planning phases for Rivergate. We will put in a fitness center 7,000 to 10,000 square feet; new interiors; new windows; and change out the lobby and hallways.
Chelsea has just begun. We’re mocking up and testing different kitchen scenarios. We have to change out the lobby fixtures, put in more bike-friendly storage, and then we’ll go into the individual apartment homes and give them kitchens.
At Wall, we’re still in the planning phases. It was rehabbed in 2008. We don’t see much physical needs — we see service needs.
Q How much do you expect to spend on these projects?
A Over all we’re looking at probably $75 million, and it’ll be over the next three-year period.
Q By how much will rents be raised afterward?
A The average rent that we’ve been raising on things after we’ve changed them have been somewhere around 14 percent.
Q So no more concessions?
A Not in Manhattan.
Q How does New York compare with other markets?
A I’m in 20 markets. I would rank it in probably in the top quartile in terms of stability. Right now the best markets are probably San Francisco and Seattle, primarily driven by the tech jobs re-emergence, followed by D.C. and Boston, and then New York. Our weakest is probably Florida.
Q Do you have long-term goals for the New York market?
A Absolutely. Today we’re a $10 billion enterprise with low leverage, and we see ourselves growing to $12- to $15 billion. Manhattan would be 15 percent of that, and so as the entire enterprise grows, part of it will grow here in Manhattan. I think we’ll mostly stay on Manhattan — we probably won’t go off in the boroughs.
Q What are your renters looking for these days?
A Our target renter is 20 to 35. I think what they’re really looking for is flexibility, to be able to conduct business on their own terms. That means that it’s self-service, and that it’s 24/7. Now, physically, I think the millennium generation is looking for what they grew up in: big common areas full of amenities like pools and fitness centers and social areas, and they’re looking for connectivity and socialization. We give the Wi-Fi away for free.
Q Are you flexible with lease lengths, too?
A The resident can pick any number of lease terms, from 3 to 13 months. We try to incentivize you to have your leases mature. Rent is probably 5 to 7 percent higher for a short-term lease, because our costs are higher.
Q Economic conditions seem to have made renting more popular.
A We’re seeing a greater number of renters who don’t want to be tied down by a home. They want to be able to move wherever the jobs are, whatever opportunities are. Consumers are also deleveraging themselves and do not want to commit to a home.
Q So business is good?
A On a scale of 1 to 10, business is about an 8, and trending up.
I’ve had $2 billion in acquisitions over the last 12 months, with $1.3 billion in Manhattan.
And I have about $1 billion in development — that’s about 4,000 apartment homes. It will be D.C., Seattle, San Francisco and Southern California.
Q What will be your next acquisition in New York?
A We’re still shopping.
Article source: http://feeds.nytimes.com/click.phdo?i=b9449a6796c300275ed5a4ee1e217df3
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