Matt Giammanco of AvalonBay Communities | Thanet Circle in Princeton | Suburbia Part II

Transcript

Announcer 00:02

Welcome to American Building, a weekly recorded show whose mission is to share an alternative perspective of what we build in America, and why. Together we discover how the work of the real estate industry connects to every American. In season two, we focused on how buildings changed as a result of the pandemic. In this season, we're revisiting conversations from previous seasons, to see where Americans put their heads down at night. Together, we will discover the many definitions of home across the New York City metropolitan area, which includes over 23 million Americans. Each week, we'll visit a new building and explore complex and confusing issues related to housing access to see what they can teach us about ourselves, and our country will meet those who work to develop in thoughtful and impactful ways, who build neighborhoods to be more sustainable, affordable, accessible, or inclusive, who labor to create thriving communities, and transform the lives of generations to come. Through their stories, we will humanize often polarizing topics. Profound, surprising, and hilarious. This show is for developers and builders with boots on the ground for innovators trying to find ways to improve our industry, for the policymakers and public employees. And for any person who has walked by a building and wondered why. And now your host award winning architect turned developer and startup founder Atif Qadir, AIA.

Atif Qadir 01:53

This is American Building. And I'm your host, Atif Qadir. I'm the founder of Commonplace. Join me as it take a drive by the skylines and strip malls, crosswalks, and rail crossings, balconies, buildings and boroughs. To discover a new generation of housing. Let's build common ground.

Atif Qadir 02:26

In this episode, you will learn about garden style apartments, a type of multifamily housing. Also, you'll join me in hearing about Thanet circle, a new multi building garden style apartment complex. in Princeton, New Jersey. garden style apartments are typically two to three storey buildings, set in a complex of multiple buildings, admits landscaped courtyards, and open lawns. They originated after World War One in response to a desire for more separation than tenements could provide during the Spanish flu pandemic. They also drew inspiration from the Garden City movement in the United Kingdom. This type of suburban style living within city limits or in close proximity to it grew again after World War Two. Metro New York City has an incredible density of these types of properties from Queens to the northern suburbs of New Jersey.

Atif Qadir 03:29

Because this is housing in America, it honestly cannot be separated from race and class. The earliest garden style apartments had racial covenants preventing black Americans from buying there, for example, Fresh Meadows in Queens, which was built by the New York Life Insurance Company and Stuyvesant Town in lower Manhattan, which was built by Metropolitan Life Insurance Company both had such restrictions initially.

Atif Qadir 03:59

Garden style apartments today are the unsung hero of the multifamily sector. They perform well historically and performed very well during the COVID 19 pandemic. As rents and sale prices soared for other types of housing, garden apartments saw more modest increases. They have a starter home appeal and form a part of the solution for the missing middle between affordable and luxury housing. Also more viscerally they speak to a desire for open space, in response to the claustrophobia of zoom work and zoom school for two years.

Atif Qadir 04:38

Journalist CJ Hughes wrote a great article on garden style apartments for the New York Times. In it he mentions a new resident of a garden style apartment complex in Queens this way, Miss ginelli decided it was time to move out of our high rise when she saw families desperate for an outside experience. Turn a skinny strip of grass next are rushing traffic into a makeshift picnic ground. It seemed sort of sad, she said, eager for more lawns and trees, but not the upkeep required for a standalone house. Miss Gianelli found herself reminiscing about Georgetown Mews, a co op in Kew Gardens hills, where she grew up. Built in 1952 for returning veterans and featuring a common garden with lawns that roll up to red brick facades.

Atif Qadir 05:32

Georgetown scatters its 930 units across 60 acres. In the end, she chose Parkway village, the vibe from looping paths under Mulberry, dogwood and maple trees. With structures clustered around quads, could also be that of a college campus. The link to the article is in the shownotes garden style apartments are a popular typology in the suburbs as well offering a more affordable option than single family homes with some of the charm of dense living as an antidote to the loneliness of suburbia. This is where you should pause to listen to the 2010 song the suburbs by Arcade Fire, and the 2014 cover of that song by Mr. Little jeans on Spotify. The links of the songs are in the show notes.

Atif Qadir 06:24

In this episode of American building, I am sharing an edited version of the conversation I had in April 2022. With developer Matt Giammanco. Matt is the Senior Director of Development at Avalon Bay for New Jersey. He started his career on the transactions team at Ernst and Young. He is a graduate of Penn State University and Columbia Business School like me, enjoy the conversation. And if you are interested in more stories related to housing and impact, visit the commonplace website. commonplace is the company I founded to make it easier to finance impactful Real Estate projects. So thank you so much for being here with us, Matt.

Matt Giammanco 07:12

Thank you for having me, I appreciate it.

Atif Qadir 07:13

So I think that that's going to be a really good transition to the project that we're focusing on, which is at Bennett circle. So it's located in Princeton, New Jersey, tell us about the area and the site specifically.

Matt Giammanco 07:28

Absolutely. So Princeton is obviously a globally well known town, mostly due to the location of Princeton University being there for a couple 100 years. It's a beautiful, picturesque example of what I think you know, the best of suburban New Jersey has to offer. It's a very affluent town, it's got beautiful park settings, a beautiful downtown, a very walkable and bikable environment. Just part of the reason we love it so much, as do many, many people. And quite frankly, it's just a fantastic location, because it's got that education base, it's also got a strong corporate base as a number of other larger, not necessarily big fortune, 500, and Princeton, but there are neighboring fortune 500 companies and a lot of parts of central New Jersey, specifically related to the pharmaceutical industry, which is well known in in New Jersey.

Matt Giammanco 08:17

And quite frankly, it's just the kind of place that is drawing both families who want to raise their young children here because of the grade school system, not just the university, but I'm talking about the public school system, the private school systems that exist here, the retail, walkability, the restaurants, you know, all those collective things that are really tantamount, I think, to a great suburban environment, all of those prints in house.

Matt Giammanco 08:41

So given how developed this area is already and how expensive it is, I think a particularly interesting thing for us to dive into is how you actually acquire the site, and what the entitlements process actually was like. So tell us about

Matt Giammanco 09:00

that. Yeah, well, you mentioned it is Princeton is an affluent town and a very desirable town, which makes it you know, difficult to enter. It's a densely populated area, but you have median home values that approach the million dollars by frankly, in town, which, depending on where you look at, you know that that's a difficult statistic to, to wrap your head around. But that's part of why we're drawn here because we feel very strongly that the lack of existing rental housing is an opportunity, not just for us, but really an opportunity for the town because when you have median home prices of a million dollars, you're not going to have a lot of young couples or young couples, dual income, no children, or dual income with children that can afford to be here. And I think filling that upper middle market, I'll call it I want to see if it's even a middle market but filling that portion of the market that can be served by products other than the typical quarter acre single family home that exists in Town is a really great opportunity.

Matt Giammanco 10:02

So this deal came across our lap, it was actually being marketed by a brokerage firm first, who was selling it on behalf of a bank, who had taken the property under foreclosure, probably back up and note, this property is 15 acres plus or minus, but it was previously home to 110,000, excuse me, by two separate 55,000 square foot under 10,000, total 1980s, vintage, lovely looking, you know, brick office buildings, three storey, suburban office location completely isolated from any kind of other corporate office park. So not exactly the highest and best use, I would say, going forward. And it's why the bank had control of it again, because it was essentially vacant. So the private equity firm that bought it, we actually stayed in touch with the broker because the bank was looking for a quick sale, it's not quite the business that AvalonBay typically does.

Matt Giammanco 10:57

We're not typically land bankers, where we buy and hold lands, hoping for the entitlements to happen, we're a little more more cautious with that. And we typically look to buy things on a contingent basis where we can go under contract with someone give ourselves a decent period of time, to get the approvals in place that we want, and then close on the property with those approvals in hand. So we were able to come to an agreement with our seller who was very amicable to that arrangement. Again, our track record in New Jersey speaks for itself. And I think that's why they put their trust and their faith in us. And certainly, the brokerage team put in a good word for us to. And so we were able to enter into a contract at a time where Princeton was actually looking to solve their affordable housing equation in town.

Matt Giammanco 11:42

We don't have time, it's a whole other separate podcast for us to run through New Jersey's affordable housing mechanisms. And by which that that opportunity has come through, I would encourage your listeners to research and do their homework. But basically, every town, most towns in New Jersey, North of 300 towns in New Jersey have to come up with their affordable housing plans, which they go through the process of creating the opportunity to actually generate affordable housing in town so that hopefully, towns avoid the more exclusionary aspect of zoning most of their residential areas just for single family homes. Because that's obviously a problem and has historically been an issue here in the suburbs.

Matt Giammanco 12:21

And that's obviously what the you know, it's called the Mount Laurel doctrine that the affordable housing situation New Jersey is trying to approach. And so we were able to talk to Princeton at a time where they had the outlines of a plan, but it wasn't quite solidified. And they were still looking for a number of projects by which to fulfill the opportunity to create more affordable housing in town. And we met them at a great time where we were able to go to them with this site and say, this is a this is a nice sandbox, we have here, this is 15 acres infill, already disturbed, existing Office, this is not, you know, purely wooded, forested land. I mean, this is the type of thing that towns, especially in the suburbs should want to redevelop. They should want to expand the readable base and find these types of opportunities to create housing environment, environments where they wouldn't have otherwise been previously.

Matt Giammanco 13:13

And so through a number of negotiations over over many months, you know, in meeting with various council people and staff at Princeton, and really by listening to them, in terms of not just you know, what we think could work here. But what they have a need for in town, is how we were able to craft the overall strategy of what we accomplished here. So what we have on this site is not just an Avalon Bay community, but we actually have a neighboring 100% Senior affordable project, which is being developed by Pearl development, PIR H L, was a national developer based in Cleveland, but they have local New Jersey operations here. And they're primarily focused on affordable housing. And so when we when we heard from the town that a real need from them was not just family, affordable rentals. But in particularly, they're really concerned about the senior population in Princeton, who lives on a fixed income, who doesn't have a place to go and as continually, you know, in New Jersey, the affordable housing system is really done by a lottery.

Matt Giammanco 14:18

So it's not a guarantee by any means. For people who could fit the bill and live in an affordable unit that they get to go there. And especially on the senior end, they lose out a lot of times when a lot of the family rentals are geared towards two and three bedroom units. So when Princeton said that we were able to craft a way to sculpt the site designed to carve out two acres more or less, that we could essentially convey to the town at no cost for them to help perpetuate a affordable housing development with girl and we still had enough room to fit 221 units at our community with a mix of product types. It was it really was a win win across all dimensions because because what we ended up having is a vibrant, diverse, mixed living environment, across the board with affordable senior rentals. We have multiple products, which I can dive into, you know, shortly here that accommodate multiple demographics across the spectrum that don't always have you know that those products don't tend to exist in a lot of suburban towns, especially in town, like, for instance.

Matt Giammanco 15:25

So we're really happy to bring that together and get all of our approvals in place. And then ultimately, by the end of the contingent time period, we were able to close and start construction on the project late last year and 2021.

Atif Qadir 15:37

You mentioned there was a number of players in this process. Are you able to mention the broker, the seller or the other parties as well?

Matt Giammanco 15:44

Absolutely, yeah, the broker was a team from CBRE in our local market, our seller was actually an entity of Caber, or ke b r, which is a private equity investor located in North Jersey, they invest nationally, however, and they are, again, a great partner to have in this situation, because they understand the real estate business. They understand, you know, how it works and what it would take. And we kept a very transparent line of communication with them along the way, in terms of how things were shaking out, and you know, where contract was going to land in terms of the number of units we were going to achieve? And and all of that, I think was, it was just a perfect kind of partner for someone like us to have needs, the time and the space, quite frankly, to do what we do well and achieve these entitlements.

Matt Giammanco 16:29

Absolutely. So let's dive into more of the details of the development strategy. And let's talk about numbers along the way. And I know that there's a lot of terms that are often used in affordable housing, like area median income, and just make sure to include some of the details sort of just our listeners are aware of what that is.

Matt Giammanco 16:50

Sure. So by way of overall background, the project as it stands today, and as is approved, is on the AvalonBay side a 221 unit inclusionary rental project, meaning that there's a component of affordable housing actually located within our community. Those units are deed restricted for a period of 30 years. They stay on the books for a long time, and we're able to work with an affordable housing agency to continually provide those units for rent should they ever become vacant once they're leased up. We have a mix of product types at the community, which is something we really strive for, especially in our suburban markets. We so we have a larger four storey elevator building, we have two separate, we call them stack flats, but separate three story walk up buildings with a smaller volume 24 and 39 units.

Matt Giammanco 17:41

And then we actually have a number of rental townhomes and townhomes in this case for your listeners is not a form of ownership which a lot of people sometimes confuse it as. But when I say townhome, I actually mean a multi level style of living. In this case, it's inclusive of a parking garages, single car parking graduate double cars, their larger unit, whereby residents can live in a townhome just like they would for any of the for sale builders with the exception that they're renting from us and we continue to own the unit but it's a really great product type that goes without saying post COVID The interest has picked up tremendously across the board throughout our entire suburban portfolio which had its own tail winds coming from COVID but the larger format of these units, they tend to be 16 to 2000 1600 to 2000 square feet, again with an integral garage that it's just for the resident.

Matt Giammanco 18:35

They're really unique and not a lot of people have built them previously in the state of New Jersey Avalon based on it a couple times. But we really enjoy it because it just provides a those three products I mentioned provide a real diverse list of demographics and income levels and the type of renters you're going to get. You have everything from Studio units for your young professional up to these two and three bedroom townhome units which by frankly are do really well with with our kind of empty nester demographic the early empty nester demographic who's okay with the stairs and really wants their garage and their two bedroom den so they can work from home and they have enough space for when the kids and the grandkids come there is really that perfect product type for them.

Matt Giammanco 19:16

And, and we know from experience having built in Princeton before because we do have an existing asset in Princeton right on Weatherspoon street that was built in 2016. We had a significant proportion, more than a third of our initial lease up was from people who already lived in Princeton. And so that speaks to the kind of demand drivers that the town has because people who have lived here for 20 3040 years, don't want to pay the property taxes anymore, don't want to go there online, really still want to be here and really believe in town and they really want to walk and bike to places. And so having multiple products for people like them and the younger professionals and the younger families who want to find a foothold into the town. That's that's That's what those multiple products are able to allow us to achieve and provide to this market.

Matt Giammanco 20:04

And then separate and apart as I mentioned, at the top, the two acres kind of in the middle of the site is being developed by Perl as 100%, Senior affordable rental project. So there's a couple of terms in there. One, it's 80 units large to is being developed purely for seniors. And that's defined in New Jersey as those 55. Correct. So it's a deed restricted product, which is mostly ones with a couple two bedroom units. But that is specifically geared towards affordable residents who wish to live in that type of community. It's another four storey elevator building, again, servicing that clientele, which does tend to be very favorable at the elevator. And it's it's being built by someone, quite frankly, who specializes in that type of affordable housing and provides a really specific set of programs and design guidelines and support. For those residents that Avalon Bay doesn't normally do.

Matt Giammanco 20:59

We Avalon Bay I forgot to mention also have 11 affordable units in our own community. And that's a mix of well called more typical family rental units, in addition to five additional units that we are developing specifically for to work with an outside agency in terms of potential special needs housing for kind of older adults who may have autism, for example, and we're searching for providers right now to kind of help us fill that gap as well. So there's a whole mix of affordable housing at this community that is that is integrated within the community. And that's really the best aspect of it, right? My Units are interspersed throughout the community, Carl's development is right next door. So the town was able to achieve. If you look at the metrics of the total development, over a 30%, affordable set aside, if you look at, you know, the 300 or so units that are there, which is not something as you know, that most developers can afford, or even entertain, because in New Jersey, those metrics are very, very difficult to to underwrite at that level, you know, the typical affordable set aside for rentals in New Jersey is 15%, for sale is 20.

Matt Giammanco 22:08

So the town's looking at this saying, will we get affordable housing for seniors one, two, we fulfill our affordable housing, housing obligation at a greater level than we could have it if it were just a standalone development. And we get this inclusionary housing in the Avalon Bay market rate building. You know, again, it's a lot of boxes rejecting I think a lot of good was achieved in the way we're able to integrate that that mixed desire that mixed income level design in what we have in the communities.

Matt Giammanco 22:35

So walk our listeners through this project in terms of what they'll be seeing as they drive up, or they walk up and give us a taste of like the finishes and like the layouts and things like that.

Matt Giammanco 22:47

Sure. So when you come into the community, you'd be making a left onto the road called Sanat circle, which, again, I lived in and around Princeton, for most of my life. I never knew these buildings were back there, because they are tucked in a old school cul de sac 1980s Vintage office building that was heavily wooded at the street. So you actually couldn't see back there. And there was a row of residential homes on the other side. So now with the way our communities laid out, you can actually when you make the left, you'll see just as you come into the community, the first set of the first kind of townhome node or townhome neighborhood, coming up on the left, and then as you come up to the circle, you see our Clubhouse that's facing front and center a little bit center right, fair, to be honest.

Matt Giammanco 23:33

And then Pearl development would be at the call at nine o'clock 10 o'clock position on the circle. Again, this kind of old school cul de sac development, especially for an office building is it was very odd and very bizarre. So that's why we did it. We tried to do a thoughtful job of trying to connect and bring it out to the street a little bit and make it a little bit more visible from what we could there's obviously some environmental concerns and other things that you don't just want to you know, make way for it just to make people see it. But I think the visibility was a key aspect for people to feel like they have a sense of arrival. But we're also using that secluded nature a little bit to our advantage right people's people do sometimes want to come home to a more quiet secluded environment. And we have a we have a number of residential neighbors around us that we're also being sensitive to.

Matt Giammanco 24:19

There's a residential single family neighborhood out front, there's a residential townhome neighborhood, a for sale, townhome neighborhood that's just kind of across the creek and over to our east. So that's why we wanted to be sensitive to laying out the lower density townhome product in locations that was more approximate to the existing residential neighborhood. And the higher more dense product is located a little bit closer to the rear of the site. So that it's again not as not as upfront where it faces on Turkey and road. And so the clubhouse is there and then the four storey buildings right behind it. We have another townhome neighborhood over to the right and there's a ring road that circles throughout the entire community for easy circulation of both our residents and also for emergency services and trash and all that The things that we need to maintain the community, fronted by the clubhouse.

Matt Giammanco 25:04

And then if you go around around the clubhouse to the right, we have another townhome neighborhood, again, that's facing our residential neighbors, there's kind of like product looking at like product, right to kind of help the scale. And the visual interest of those, the scale and the visual nature of the communities that are facing the residential neighbors. So they're not necessarily all looking at something that might be a little bit taller than them. So we take all of that into consideration, in addition to maintenance operations, you know, lease up operations, all those things that a long term property manager like AvalonBay has to take into account, it's really not just as simple as flipping 200 units in the community and saying it works, because it fits in, you know, the acreage, there's a lot more a lot more to that, and a lot more thoughtful exercises and have to go into that site design aspect.

Atif Qadir 25:52

So speaking of thoughtful exercise, it's such a complex project, the financing for this project was also very complex. So help us understand what the Money Story was behind this project.

Matt Giammanco 26:05

Sure. So you know, AvalonBay, developers have a very fortunate position and that we, we don't have to go to a bank. For most of our projects, right, we've finance almost all of our projects, I'm not gonna say all of them, but almost all off of our corporate balance sheet, which was helpful, but also is a pretty strenuous internal process as well, right? Because we are pretty diligent with how we spend our shareholders capital, and very thoughtful about how we tried to help lay that. So we have to put in a lot of effort and due diligence upfront before we're able to really get out of our due diligence period in our contracts to ensure that we're approaching that development, the right way, understanding the risks, and managing that process throughout throughout the years that it takes to get something done in New Jersey.

Matt Giammanco 26:51

So for the AvalonBay portion, we were financed, as we typically are for all of our construction off of the corporate balance sheet, the Pearl Project next door to us, that was 100% affordable housing project, which comes with a whole host of other difficulties in terms of how you put that capital stack together, right. So there's tax credit financing, both at the state and the federal level. There's other local state benefits that they have to sometimes pursue. But in this case, what we're able to do with Princeton, who was very supportive of this, again, because of all the benefits coming to them, is that we said because we are conveying, and ultimately, in completing the initial site clearance demolition, for the affordable housing, we're giving up two acres of our land. Right. So the the benefit to us is that the site was actually declared an area in need of redevelopment, which is a specific term in New Jersey, and we don't have to get into the nuts and bolts of that.

Matt Giammanco 27:44

But ultimately, that opened up the way for a separate redevelopment plan, which kind of crafted the zoning standards for this site. And a redevelopment agreement, whereby Avalon Bay receives a we have a financial agreement, where we come to terms with Princeton, where instead of paying the typical ad valorem taxes, we're paying a percentage of our gross revenue that we generate on the community for the next 30 years. When you do a redevelopment designation, you're saying this site, but for this redevelopment would not be redeveloped? Right? It would stay as an obsolete, vacant, suburban office complex. And so to facilitate that, it's called a payment in lieu of taxes. But that term, I really don't like that term, because we are paying taxes, you're paying a difference? Yes, it's lower, but the municipality is getting that benefit of having a greater proportion come to them.

Matt Giammanco 28:36

And so our financial agreement is actually funding a good portion of the affordable housing development, right, because our tax dollars from that financial agreement are going right over next door, and helping Princeton facilitate the 80 unit, senior affordable job, which was again, a critical component of that. And again, the town's protected because the better I do, owning and managing and renting the Avalon Bay rental community, the more money that's going into the town, and that's for a period of 30 years. So it's no small, no small thing for the municipality to have those kinds of benefits accrue to them. And again, it facilitates these type of unique, multifaceted solutions that wouldn't otherwise come if it were just kind of a simple rezoning effort. It was complicated.

Matt Giammanco 29:21

And obviously, it took a lot of time and negotiating and, you know, a lot of public meetings because it's not as straightforward as a typical rezoning. But I think the benefits are going to be huge for something like this. And Princeton, quite frankly, for years to come. I think the expression

Atif Qadir 29:36

that you use that's really important for folks to understand is but for and that essentially, is the means by which you form a rationale or reason for all public financing programs. Because I'm sure you're very fully aware when you have one set of public financing that might have requirements that are contradictory with another and how do you massage this whole collection? In a public financing to create the end solution, which is great affordable housing and great other asset classes, but do it in a way that is actually reasonable for the developer at hand.

Matt Giammanco 30:12

Absolutely. And then the one critical element as well, which we're able to tie into this deal was timing. Right. So once we're under construction, the town knows we're coming. And we know, we have a lot of faith. And so time, in this case, adding the financial agreement that we have, to pearls timing, eliminated a big chunk of the question mark, regarding their timing, because again, affordable housing, a lot of it's based on calendar year, there's a lot of stipulations to the timing. And when you're in the ground, and under construction, when you're leasing. There's a lot of challenges to that, again, I'm not the expert in that someone like Earl is certainly more well suited in that. But it's, it's nice to know that our project helped contribute to that aspect again, and it's all running synchronous with each other. Right?

Matt Giammanco 30:58

We're both under construction right now. They're probably going to be done and leasing up before we are but not by much, right. So we're working in this ecosystem together. And there's a lot going on. That's, that's mutually beneficial.

Atif Qadir 31:09

Okay, so let's go big picture now, to understand how a famous well known company like AvalonBay approaches development. So explain to us how a development company is structured.

Matt Giammanco 31:23

Sure, so I will explain how we are structured, which I will be biased and say it's pretty productive. But there's a couple different ways to go about it. But we we prefer to have a more regional approach. So Avalon Bay is structures that we have our corporate headquarters in Arlington, Virginia, but we have a number of regional offices throughout the country in our core markets. So that's Boston, New York, New Jersey, metro area, Mid Atlantic, and then out of West Coast, Seattle, San Francisco, LA. In addition, now to other expansion markets, which Avalon Bay is more recently entered in southeast Florida, Raleigh, Durham, Denver, and then also Dallas, Dallas, and Austin. And so those last four that I mentioned, they were not a part of the company's strategy is as recently as three, four years ago.

Matt Giammanco 32:11

So we've been very cautious and very thoughtful again, about what markets we're in and why we're in those markets. And we do that for a reason. Because to do everything that we do, as a vertically integrated developer, which is developed construct, we act as our own general contractor throughout most of our jobs in the country, and operate these communities in our local markets. We need to have that local knowledge on the ground, full time basis. So we're not fly by night developers. We're not just kind of developers who say I, you know, I cover this, this five or six state region, we're very thoughtful and targeted about who we have in our offices, making sure that they're hyper focused on the local environments that we have there.

Matt Giammanco 32:56

So in my local New Jersey office, like I said, we have my development team, which has been there, we have a lot of tenure going on my senior vice president's been with us for almost 20 years, my other Vice Presidents been with us for over 10, I'm coming up on nine years, myself, and my colleague has eight. So we've actually pin our core, our four set of four developers has been together for quite a long time, which is really a testament to how well we get to know these markets and other offices have the same kind of longevity story. But what's great about our regional office setup is that when I have a construction question, or I'm trying to think about what product I might work here, or what's the latest pricing on this type of thing, I go next door to my construction directors and project managers who were sitting at their desks, and I'm able to talk with them in real time about what my thoughts and concerns are.

Matt Giammanco 33:45

And if I have an operations questions, I go to the other side of the hall and talk to them about what they're seeing in terms of the maintenance costs for this and how we can think about underwriting this type of deal and those kinds of metrics. So that really is a strong suit of ours in Avalon Bay is that we're not there's a lot of autonomy at the regional level, we have the tremendous benefits of all the things you could think of at a $35 billion market cap, you know, s&p five traded company that are centralized in Arlington, all the finance capabilities I mentioned to you, market research, design, accounting, whatever, you know, pick it, pick whatever pill you want, all those corporate resources are there to help us. But honestly, the local teams get a lot of autonomy and a lot of trust, which is earned by the longevity of the people I mentioned to you being at the company for so long. We work very hard to keep that and that's that I think is a unique benefit and aspect of Avalon Bay compared to a lot of other developers.

Atif Qadir 34:40

So within a particular market, so be at Princeton, or in Austin where I am now, how do you choose where you are developing within the city? So both are sizeable places, and we have many choices and tell us how you go through that process.

Matt Giammanco 34:57

Yeah, so you know again, it is We're focused on our core markets. So in my case that happens to be north and central New Jersey. So we kind of my team at a high level, just having lived in New Jersey, most of my life, as, as my, most of my colleagues, you know, we know the ins and outs of those North and Central Jersey markets, specifically in New Jersey, what towns we like and don't like, or what areas we like and don't like. So we have a pretty hyperlocal focus that we're, we're specific to so when deals come across our desk, from brokers, or, you know, hopefully, more often from, you know, from other, you know, closer networking contacts that we may have, you know, we do get a lot of first calls, thankfully, you know, we're able to make those quick decisions about what works for certain sites, whether or not it's got good mass transit, proximity, whether or not it's located in a town that we would do anything to be in, you know, quite frankly, like a Princeton or we're able to ever find something and in certain other towns throughout New Jersey, there are towns that we would kind of pull the trigger on no matter what if we're able to find something there, but through challenges of zoning, or just lack of available land.

Matt Giammanco 36:04

You know, I'm taking a lot of places in Bergen County, where I'd love to do more, but Bergen County is split into over 70 municipalities that are some of which are just, you know, couple 100 acres, they're not they're not very large, and there's not a lot of places to go. So it's us being pretty thoughtful when we see things come across our desk, or trying to study what's going on in those local markets that we helped make those decisions. And then, you know, that's just really at the market level, the next level down is then looking at the specifics of the sites that we're finding. And what about it? What about those sites makes it appealing? Again, as I mentioned, is it close to mass transit or close to a highway? Does it have a more of a secluded feel? Or is there something? Is there a neighboring industrial development that we don't like, you know, the all those kinds of things, then come into it at that next level of analysis, to help us decide whether or not it's worthwhile and even.

Matt Giammanco 36:53

And even then it's not just always, you know, thumbs up, thumbs down, and you get into well, how much of a read discount is that going to be to this comparable that was built five years ago that has these product types, there's a lot of nuance to that decision in that conversation, which is something we balanced between our local knowledge and then what our market research group from Arlington is telling us about what they see in terms of future supply and other metrics that may be coming down the pike for these various markets. So there's a lot of both more macro and then, you know, the ultimate hyperlocal decision making for us to try and move forward on something.

Atif Qadir 37:27

So say you now have an amazing property in, in Princeton, or in, for example, East Austin, which is the hottest part of this city. How do you figure out what it is that you're actually going to be doing on the site in terms of development?

Matt Giammanco 37:43

Good question. And I think it's a really good question. Because again, this is a market where Avalon Bay is making a very targeted effort. And I've been involved on three projects in Princeton, all of which one of which is done, completed Avalon Princeton property I mentioned, one of which is under construction, which is Avalon Princeton circle, the project we're mostly talking about today. And I have a third development, which is about half mile away from Avalon Princeton circle, which is actually located at the neighboring Princeton shopping center, which is another grocery anchored about a 220,000 square foot open air retail center located in Princeton pretty unique in terms of its 1950s vintage and its kind of character and appeal to the local downtown, specifically for the location of the of the grocer, which is a huge draw.

Matt Giammanco 38:31

So when you're looking at this market, and you have not just one, but two new opportunities to develop in town, you know, we we were incredibly giddy about the prospect of it. And then you say, Well, how do we make them different, right? How do we think through, people maybe have a false conception of bigger builders like ourselves, and everything's just kind of a cookie cutter project that goes through a machine and we spit out 200 units. But if only they knew how much we talk internally about all these kinds of decision metrics. It's something we took a really deep dive on, right, because it's a you have to look at the opportunities presented at each site. So the Princeton Circle Project was, again, 13 acres net once we carved out the two for the affordable housing, which is a good size site for a suburban density product.

Matt Giammanco 39:18

So that's why we're able to get that mix of the product types that we have in there because we had a little bit more land and existing impervious area with all those parking lots to redevelop. In the case of the neighboring Princeton shopping center community. It's located in the parking lot of what it's located in what today is the parking lot of Princeton shopping center, but it's only three acres. We have 200 units there on three acres to 21 on 13 on the other side, so naturally that's going to lend itself to a much different product set. Right so in that case, it's a four storey product located at the shopping center with a completely wrapped parking deck, because we're actually parking our residents within the parking structure as opposed to out in the snow. sofas like that circle.

Matt Giammanco 40:02

And the one thing that I will not the one thing one of the many things I'll compliment Princeton on No, but what we were able to do in this redevelopment process, which I hope more towns move in this direction, is be really thoughtful about what we're doing in terms of walkability, bikeability, and vehicular parking requirements. New Jersey, as of today, it's not changing by the time you release this, but one day, we will get New Jersey to change the state standards, which are very outdated in terms of parking requirements, basically, to round to round for your audience. New Jersey requires in the suburbs that every community park in about a ratio of 2.0 stalls per unit. So for normally, the exactly your your eyes are bugging out on me.

Matt Giammanco 40:49

A lot of your listeners, maybe more urban markets are used to hearing parking maximums, in New Jersey, that the state standard is treated kind of like a it's treated like a minimum. But it's it can be misinterpreted sometimes, but either way, it's essentially most towns default, to this parking ratio. So you can imagine, not just the climate change in practice the space of having to build or find space for that many dozens more parking spaces in these communities. So both, for instance, circle and the Princeton shopping center community are parked at a much more reasonable 1.5 spaces per unit, which is a ratio that works a lot, still a lot. But knowing that demand in the suburbs can fluctuate up and down is a manageable amount, we have good data from our existing Avalon prints and assets that we can lower that state, we can lower the parking ratio off of the state standard and be very comfortable with the flexible nature of what we have for our residents to park.

Matt Giammanco 41:46

Because we know a lot of them are going to bike, a lot of them are going to walk and a lot of them are going to not have to need two cars necessarily in that town. So by doing that, and having I mentioned that as an aside, because that allows you the flexibility and design to think through the different product types that we have. Right. So we mentioned the townhomes with an integral garage and a tandem tandem driveway spot, excuse me, you have other units in that community that are then surface Park for the remainder. And then in the prints and shopping center, you have a mid rise building with generally smaller unit footprints a lot more one bedroom units there as opposed to that circle to help balance out when we look at the portfolio overall, what's our total unit count, like how many one bedroom units do we have not just here, but in total in the Princeton area.

Matt Giammanco 42:28

And so that was a very targeted and thoughtful conversation we had to have. Because we don't want to just make the same cookie cutter product twice. We don't want to make the same product twice, necessarily. So that's why we have to be very thoughtful. And that goes without saying in all of our markets, but especially in the ones where either we have a good concentration of units, or there's a lot of competitive properties that may already have done something, right. If we see in a certain market, they have a ton of larger, two bedroom and three bedroom units that maybe aren't getting the same kind of rent per square foot, well, we're not going to go chase that necessarily that part of the markets covered we want to provide something that doesn't exist necessarily, but we want to provide the community that's near mass transit, that no one's had an opportunity to live like that before. Those are the a lot, you know, a piece of the things that we think about as we move through the process and those types of towns.

Atif Qadir 43:19

So let's say my time. So what are typical timelines to do all these things that you're talking about on a project for New Jersey?

Matt Giammanco 43:30

Easily years, sometimes longer than that. No, I haven't. I haven't been around to work on anything that's taken a decade. But we have projects that have taken seven, eight years to go through entitlements. It's complicated. And it's tricky, and it's a high barrier entry to market for a reason. It's difficult to find land, it's difficult to get entitlements. You know, it's not necessarily as difficult as other urban markets for getting building permits. That's almost I don't want to say the least risky, but it's, you know, that's put that off to the side, but just finding the way through the legislation and the bureaucracy of New Jersey and again, to remind your audience, it's not just you go we want to develop something in New Jersey, if you go to a larger county government or you go to the state government, New Jersey has 565 individual municipalities, each of which is their own kingdom.

Matt Giammanco 44:23

So all land use decisions are run at the local municipal level in New Jersey. So even if you get a site that's two miles away from another site, for example, we have a community and Hackensack community and Teaneck are two miles apart, much different structure, much different governance, much different process. And so that's why again, the hyperlocal knowledge that we strive to, to obtain is to know the ins and outs of each individual town and really what they're looking for. So whether or not it's talking with local attorneys, talking with other council members or other staff in those towns, kind of figuring out what's appropriate for those markets. is pretty good.

Matt Giammanco 45:00

According because the entitlement process for land that is not zoned, which is most of the stuff that we buy is not already zoned and entitled for multifamily use, it takes that long to either go through the rezoning process, go through the redevelopment process, as I mentioned, which is a very public heavy process where you're going through seven or eight different meetings between the council and the planning board at various stages in order to effectuate the approvals. And that takes a lot of time and effort. And it's dependent, quite frankly, on the municipal calendar, which, you know, takes its own set of time, because you're not the only developer in town is trying to do something you're never, you know, you can get stuck behind someone trying to put a deck on their on their patio, at a public meeting, and you never know what you're gonna get quite frankly.

Matt Giammanco 45:45

So last question for you, Matt, is help us understand about technology, how are you incorporating technology into your day to day work, we have sister industries like automotive and aviation, that have been incorporating technology in a much greater sense than we have. And they've been doing for much longer than we have. So we got some catching up to this tell us on the ground, what do you guys do,

Matt Giammanco 46:07

You're telling me we are doing quite a bit and trying to learn quite a lot in terms of what we're doing from a technology standpoint, because again, we have many dimensions by which to take advantage of existing technology. Obviously, I don't wanna say the easy side. But the more tangible side that most people could understand is on the resident side, right. So when you're living in an Avalon Bay unit nowadays, or even when you're touring in Avalon Bay, you're dealing with a lot more technology than you used to, right. So you get into the unit, you've got your smart thermostat, you've got the all the other technological bells and whistles that are augmenting people's residential experience that they wouldn't otherwise have had in rental projects, even you know, 10 years ago, when you're coming to lease or tour in our communities, you're doing a lot more that upfront and online than you ever were before. Right?

Matt Giammanco 46:52

You're dealing with a lot of times we've quite frankly, more recently, and COVID, being the biggest driver of this change is self guided touring, giving people access through their latch hardware, you can come into our amenity space, you can view our club room, our leasing room, you can even view a vacant unit, or the model unit that we have set up right so that that interface has completely changed how we're interfacing with prospects and with our active residents who live here. And you know, pick whichever way you can think of right from from package delivery to, you know, having online FAQs answered, you know, through our automated system. Now, I mean, there's there's a whole host of ways that we're dealing with technology on the resident front. And then you look at the bigger piece, which I think I think your comment is maybe most targeted at, you know, the development and construction industry, right, which is starved for technological innovation for for decades, right.

Matt Giammanco 47:49

And I think we're really starting to see a lot of that come to fruition. And, you know, we don't, I guess the difficulty we have is trying to just figure out which horse to pick, right? It's it's not easy to know, in this landscape where there are a lot of companies bubbling up and coming to the forefront, trying to figure out which one is right for us, right. So we're experimenting with a lot of different technologies on the construction side, whether or not it's been pro core or other innovative technologies, even just me getting Bluebeam review, which was like a life changer just for me. So I can pretend to be an architect, you know, in my in my day job, little things and big things are going along way. You know, and then it's it's on us as a as our company to try and figure out the right way to approach those technologies going forward.

Matt Giammanco 48:36

Because it's a difficult landscape. And we're trying our best to investigate it. Again, at the corporate level, we have people looking at these types of things all the time, trying to figure out the right way to integrate them into our communities, right. So it's been fun to watch, I have a lot of learning to do on the tech side. But quite frankly, it's really exciting to see those changes, especially on the construction side, which I think is going to do nothing but help us in terms of not just the speed at which we can build but the quality at which we can build things which a lot of times is is not seen once the prod once the drywall is up and everything's fitted out and people live there. You know, it's it, people don't understand the quality. And the thought that goes into all the guts of the building behind the scenes, but we do and that's as long term owners, we think really, really hard about what we're doing behind those walls and why we're doing it. And that's something we take a lot of pride in. And we're continuing to look at ways to try and do that better.

Atif Qadir 49:33

Excellent. Thanks for joining me today on American Building. If you enjoyed this episode and want to hear more, and subscribe on your favorite listening app, and don't forget to rate and review and friends. I've teamed up with writers for the New York Times and dwell magazine to launch a digital media platform to tell All the fascinating stories of the impact developers and capital providers, I work with a commonplace. Check it out at commonplace.us