By William Moore, AIA
President, Portmanteau Partners, LLC
Workforce is a powerful word and something that companies and entire industries depend upon for their success and survival. Without a happy and highly functioning workforce, businesses would fail, and entire communities would collapse.
Because housing has become exponentially expensive, with no relief on the horizon, employers are increasingly searching for ways to leverage the power of their businesses to create housing at a rate that is attainable to their respective workforces. Increasingly, it’s critical for competitive companies and industry leaders to do all they can to provide their workforces with outstanding working conditions, including, a comfortable and affordable way of life.
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Nothing speaks more to a person’s contentment than having a place to call home. A relaxing and secure place to live is the foundation of anyone’s wellbeing. Companies that are attentive to this need and able and willing to provide conveniently located housing to their workers, will undoubtedly build a more efficient workforce leading to business stability, greater profits and a competitive edge.
Here are some of the important and sometimes mandatory considerations when it comes to designing and building quality workforce housing:
Design
It’s important to have an idea about what specific ‘work force’ the project will be serving. In the case of a corporate client, there is usually very specific information detailing the type of personnel they need to serve, as well as their income levels, familial status, lifestyles and personal needs.
For example, a multi-family project serving ski resort workers may be designed for a predominately twenty to forty-year-old, single-household demographic, whereas an agricultural or manufacturing facility may have more families with children. This demographic also determines the optimal site selection as it relates to recreation, religious centers, day-care, schools and other personal needs and conveniences.
Additionally, the target demographic would determine the unit mix of the project. For example, the family group would require more two and three-bedroom units whereas younger singles would be content with studios and one-bedroom units. The developer and partners also generally plan to hold the project for a longer period of time with operating expenses that may or may not be shouldered by the residents. This sets up a design challenge that is often different that traditional multi-family apartments projects where materials, equipment and energy-use decisions take on a heightened meaning.
Sensitivity and thoughtfulness around the community design is essential for the success of the project, as well. The recommendation is that the communities live on their own, with onsite or nearby amenities, design variation and aesthetic appeal. Commercial identity and branding associated with the company sponsor is eliminated, to avoid any feel of the historical, ‘company town’. The community as an autonomous, desirable ‘place’ supports the real estate value, and longevity of the project.
Municipal and Commercial Participation
The developer has a different primary stakeholder in this equation compared to traditional multi-family projects, providing a unique and incredible financial opportunity. Whether a municipal or industrial ‘partner’, the values of this new stakeholder are complementary to the Developer and are a welcome addition to the project equation. This new stakeholder also has a longer view of the outcome, desiring utility and service for decades, post-completion. A typical speculative project, in contrast, is required to meet a one-dimensional pro-forma with the singular goal of serving the highest-paying resident and doing so as efficiently as possible (i.e. as low as possible up-front cost). Both the developer and the equity investor of the typical spec’ multi-family project are often seeking to retire their position as quickly as possible.
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With the workforce project, often the industrial partner desires to control the project for as long as possible, gaining confidence in the knowledge of the quantity and status of housing it will have available, as the business needs grow.
What is compelling is that the demand side of the equation is also a participant in the financing component. The end user and their long-term goals are part of the industrial partner’s business model. Numerous avenues exist for these municipal and industrial partners to participate, and earn a favorable return on their investment, including:
1. Providing equity or lower-interest mezzanine loans,
2. Bringing some or all of the demand via various avenues, such as
a. Providing a rent credit to the employee for the subject property.
b. Directing employees to the project leasing agent.
c. Providing a rent guaranty to the Developer to assist in achieving favorable financing terms, in turn, lowering costs.
By supporting the financing of the project, employers generate a monetary (cash-on-cash) as well as a long-term growth return on their investment. Industrial and municipal investors gain the following:
1. Control of available housing for their employees.
2. Certainty of the quantity and types (for sale, for-rent) and program i.e. 2-bedroom, 3-bedroom units, etc.
3. Certainty of the cost of housing at present and into the future.
4. Monetary return on the investment through cash-flows and/or at disposition.
Many decisions about workforce housing will depend on site selection, unit mix, rental and sales rates.
As an Investment
The investor who would realize the highest value in workforce housing is a company or municipality that will derive an economic benefit from a happy, stable and secure workforce. The investment will boost the company or municipality value, while simultaneously creating a measurable economic return on the monetary investment over time.
As suggested above, workforce housing is a longer-term investment and generally not designed for an immediate exit, although in certain environments (physical and monetary), it could be possible to sell the asset or position after stabilization.
Additional Considerations
It should be noted that large employers have some leverage with municipalities and can assist in securing things such as development impact fee reductions or offsets, utility connection cost reductions, and assistance with infrastructure engineering and costs.
Developers can operate a single, or multiple employers’ projects in a fund across several markets they may be operating in, creating a larger entity to create even further cost reductions in financing, administration, and execution costs. This format also renders the asset pool to be more stable and flexible as market performance fluctuates over time.
A content workforce is good for any company’s bottom line and few things contribute to this more than providing a happy place to call home.
William Moore, AIA, is President of Portmanteau Partners (www.portmanteaupartners.com), a firm specializing in the design and development of workforce housing. The firm is currently working on the $40 million workforce housing project for meatpacking giant Cargill, Inc. in Fort Morgan, Colorado.
