Fairview Village: the full mix in a small package

Editor’s note. This is the second in a series of articles that explore the economic realities behind new urban projects. Fairview Village packs a lot of complexity into its 93 acres. Located in a suburb east of Portland, Oregon, the project not only mixes residential, civic, and commercial uses, but also features a remarkably wide range of single-family housing types, as well as a nearly even split between multifamily and single-family dwellings. The majority of lots have been sold to builders, but developers Holt & Haugh also started their own construction company to set a high standard in construction of residential and civic buildings. The project began construction in 1995 and is now more than 80 percent complete. Randy Jones, Holt & Haugh’s vice president for land, says the return on investment in Fairview Village has met the expectations set down in the pro forma. To date, the 274 single-family homes have yielded a profit of $30,000 per unit (see table at right for a complete breakdown of costs and returns), while the 232 multifamily units have yet to show a profit two years after their completion. “Right now we are basically paying the bills on the multifamily, and the occupancy rate has been steady at 96 percent for almost a year,” Jones says. He expects that the apartment buildings will move into profitability within two to three years. The 133,000 sq. ft. Target store now under construction in Market Square, the project’s retail center, is the lynch pin that will generate the traffic needed to attract smaller retailers into the last phase of commercial buildings. The store opens in March 2002. Steady appreciation Fairview Village has seen a steady appreciation of home prices, at a rate exceeding the average increases in the metro Portland area, Jones says. Lower-end homes that initially sold for $139,000 are reselling for around $165,000, and moderately priced homes that started at $175,000 now cost $220,000. Holt & Haugh acquired the property for $2.8 million, a price slightly below the going market rate, Jones says. The land was part of a larger parcel owned by the semiconductor firm Tectronics, which had plans in the 1970s to build its world headquarters on the site. Though the company had the option to sell to large conventional builders, “they did the right thing and sold it to us at a very good price for the purpose of developing this kind of community,” Jones says. Fairview Village currently has a fairly high residential density of 14.1 units/acre, but the added income potential is offset somewhat by the cost of infrastructure construction. Jones estimates that infrastructure costs were 20 to 25 percent higher than in comparable conventional subdivisions. The project includes 10.65 acres of parks and other public recreational amenities. Single-family homes in Fairview Village encompass a wide range of building types. The smallest units are fee-simple live/work units in rowhouses on lots as small as 900 square feet. The project also includes townhomes arranged around courtyards, and several duplex units. The average lot size for the attached housing is approximately 1,900 square feet. Some detached lots with creekside frontages and environmental setbacks measure up to 13,000 square feet, but the average detached home sits on a 5,300 sq. ft. lot. The majority of apartments are located in three-story buildings, but units are now also available above the newly opened branch library. Future commercial buildings in South Market Square will include approximately 30 additional apartments above retail. To ensure the highest possible quality in the multifamily housing, Holt & Haugh elected to build the apartments themselves with the support of an equity partner, which the developers subsequently bought out. The multifamily housing cost $8.3 million and was valued in 2001 at $11 million, a substantial gain in equity realized by Holt & Haugh. Civic uses in Fairview Village include an elementary school, city hall, post office, and library. Holt & Haugh worked with the original land owner to secure the school site — a property the local school district bought directly from Techtronics, and therefore not included in the 93 acres of Fairview Village. The city hall was built by the city on a site purchased from the developers in a for-profit transaction. Holt & Haugh's construction company built the post office and library, and the developers sold the leases to the postal service and the city. “In our case, the civic elements have penciled out positively,” Jones says. The library, which opened its doors last November, may prove a benefit to the fledgling retail establishments that have opened in the live/work units across the street. According to Jones, the coffee shop has seen an increase in daily transactions from 75 to over 100 since the library opened.