Pension fund manager interested in TNDs

Firm wants to finance apartments near town centers. Kensington Marquette Partners of Chicago, a firm that manages assets from several state teachers’ pension funds, is seeking to invest in apartments in traditional neighborhood developments (TNDs). The firm owns 9,000 units — mostly conventional suburban garden apartments — throughout the Midwest, says Bruno Bottarelli, one of the partners. Many new urbanist developers need a multifamily investor early in the project to help pay off infrastructure loans and create a critical mass for retail, says Bottarelli. Kensington Marquette would agree to purchase multifamily buildings for a fixed price based on specific criteria, allowing a TND to create density near a town center. The TND developer would select the builder. “A builder who is doing the for-sale product in the development is the most likely candidate, providing they have the resources to build a substantial number of units,” he says. Building apartments at the start ensures that a project will have its own “move up” market, especially if the renters become sold on the TND concept, he adds. Currently, many TNDs wait years to build their apartments, Bottarelli says. This is because many new urbanist developers specialize in single family dwellings, he adds. When a TND developer does get around to building the multifamily units, they may sell to a single national builder that uses inappropriate architecture. Bottarelli, who is developing a hybrid TND called Highpoint in Romeoville, Illinois, believes TNDs have high potential value relative to conventional suburban development (CSD). “There’s a big upside potential with TND communities,” he says, “The risk is that you are getting in on the ground floor.” Bottarelli is working with the National Town Builders Association (NTBA) in Washington, D.C., on implementing the apartment investment plan. NTBA will act as a filter, reviewing proposals to see if they fit certain criteria. The development: 1) Must be a year-round community — no resorts allowed; 2) Must be located in an area with strong employment growth; 3) Can’t be in a market with more than 15 percent of the total housing in apartments; 4) Can’t be in a market flooded with very inexpensive starter homes. 5) The market must support rents of $1/sq. ft./month ($750 rent for a 750 square foot apartment). For more information, contact NTBA: 202-518-6300.