Living, 10 By 10

*Living, 10 By 10*
**By Lew Sichelman**

LewS***Like many of his brethren, David Adelman of AREA Real Estate, a multi-family housing developer in San Antonio, is moving down the square footage ladder. The 247 units in his first project, a downtown San Antonio mid-rise, averaged 726 square feet. But now he’s looking at a 113-unit project in which the units will average 588 feet, but 10 will be only 380.

****“I’m looking at lifestyle trends and I’m working my way down,” said Adelman, a self-proclaimed “outsider” who started his real estate career in the industrial sector and had no preconceived notion of what apartments should be.

****However, when it comes to small, a Bellevue, Wash.-based developer may be building them smaller than most anyone else. How does 10-by-10 grab you?

****Kauri Investments has done six so-called “micro” projects of varying sizes in and around the Seattle area. While each is somewhat different, the average unit size is 100-150 square feet, chairman James Potter told a mesmerized audience at ULI’s annual spring meeting in San Diego earlier this month.

****The buildings have centralized kitchens where occupants share pots and pans provided by the developer, which also manages the properties. But they have to bring their own plates, bowls and silverware.

****The units themselves have small kitchenettes – no stove, no refrigerator, just a microwave – and even smaller bathrooms with just a shower and a toilet. A sink is in the kitchen, not far away. And there rarely is any parking.

****“It not about crunching down old plans,” the developer said. “You’ve got to take things out.”

****In his discussion, Potter warned against getting into labels, or as he said it – “Don’t get caught up in words.”

****And if his projects harken backed to the day of SROs, dormitories and boarding houses, well, that’s fine with him. After all, that’s how people were housed prior to the 1950s, he pointed out.

****Potter said his units are about his “customers” and what they want balanced against what they can afford. And Kauri’s properties tend to attract an eclectic mix of tenants, from people who earn just a few thousand dollars a month and can’t afford much to suburban dwelling executives who want a small place near their offices where they stay a few nights a week.

****There is no parking at most Kauri properties, which are fit tightly into already tight neighborhoods. Parking is often an issue at zoning because locals fear they will lose what few public spots exist in their neighborhoods. But Potter has been able to overcome the objections because only 20 percent of his tenants have cars, and the firm works to find them spaces in private garages.

****Kauri’s projects are “great communities for people with no choice but also for people who have other choices,” Potter told the session. “They’re everybody – you and me – in another phase of their lives.”

****While they might work in the suburbs, he says they’ve been successful to date largely because they are in urban, walkable locations within easy reach of transportation and retail.  “Our amenities are the community we live in,” the developer said.

****So far, Potter has been unable to attract the attention of big-name lenders, relying on mostly regional banks for funding. But that could be changing as the firm expands into Portland and perhaps other Northwest urban markets.

Lew Sichelman has been covering the housing and mortgage markets for more years then he cares to remember, starting as real estate editor at the long defunct Washington Daily News and Washington Star newspapers and finishing with a three-decade stint with National Mortgage News. His weekly column, The Housing Scene, is syndicated to newspapers throughout the country.