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Milhaus starts its third year

Posted on January 01, 2012 by Milhaus Development

It's hard to believe that Milhaus has entered its third year today. The last couple of years have zipped by and we have been pushing hard into a lot of areas and with a lot of new projects. We settled into our office at the Maxwell in March and now feel at home on the east edge of downtown Indianapolis. Penn Circle Apartments in Carmel, IN started construction in November and should have units available this upcoming Summer. We purchased University Square in Muncie, IN and continue to enhance its significance to Ball State University. We've also recently been selected to work with the City of Michigan City, IN on the redevelopment of two downtown blocks. Look for more information on that project in the coming months. In Indianapolis we received city approvals for the Mozzo to begin construction this Spring. We're working on further growing our portfolio there with the redevelopment of the former Renaissance Bay community near Keystone at the Crossing in 2012. Finally, we have entered the Houston market and are working on a project to be announced there in the next few months.

Before going forward on this year's business, here a few of the highlights from Milhaus in 2011:

Deals closed: 4
Meetings at ICSC RECon: 115
Employees: 5
Interns: 3
States with projects: 3 (Indiana, Texas, Tennessee)
ULI speaking engagements: 5
Miles flown: a lot
Units started construction: 193
Total units: 304
Total commercial SF: 41,000
New babies: 2
Jimmy John's deliveries to the office: 41
Cookies with Milhaus logos: 10

Thanks for following along. Hope you have a great start to the new year.

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Milhaus Closes on $20 Million Project in Carmel, IN

Posted on November 01, 2011 by Milhaus Development

Milhaus Development has completed its financing of Penn Circle apartments in Carmel, Ind. and plans to begin construction this month on 193 units on the approximately six-acre site. The project is one of the first in the area to take advantage of the emerging central Indiana regional transit system.

“One of our goals at Milhaus is to build sustainable buildings and neighborhoods,” said David Leazenby, Principal, Milhaus Development. “The Penn Circle location is perfectly positioned to provide housing for people employed within the North Meridian Corridor. The area has terrific access to growing companies as well as three hospitals. It is also near shopping, cultural and recreational amenities.”

The apartments are within walking distance of the northern stop for the Indy Express commuter bus, which is located in the Meijer parking lot across the street from the project. Sidewalks will be added so residents can easily get to the bus and downtown Indianapolis.

“Progressive companies like Milhaus are investing in a future with improved public transit in Central Indiana,” said Ehren Bingaman, executive director of CIRTA, the Central Indiana Regional Transportation Authority. “In addition to providing immediate access to Express Bus service to downtown, the Penn Circle project is well-placed for envisioned transit-oriented development.”

Penn Circle will include studio, one- bedroom and two-bedroom apartments with open concept floor plans and high-end features including granite countertops. The community will also have a pool and an outdoor living room with an outdoor kitchen. Leasing will begin in the Spring of 2012.

Milhaus has partnered with Gershman Brown Crowley, Inc. and the Gene B. Glick Company on the project. Gershman Brown Crowley has listed a 0.76 acre parcel on the corner of Pennsylvania Street and Old Meridian Street for retail use. The Gene B. Glick Company is serving as the general contractor as well as the property manager. The approximately $20 million investment has been financed by PNC Bank.

This is the third transaction Milhaus has completed since it began less than two years ago. In December 2010, the company partnered with the Gene B. Glick Company to purchase The Maxwell Apartments. In May 2011, Milhaus purchased a commercial shopping center on 1.8 acres in Muncie, Ind. called University Square and is now renovating the building while working with current and potential tenants on leasing arrangements. The company has multiple projects under development, including the Mozzo Apartments in Indianapolis, as well as two apartment properties in Houston, TX.

Photos

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New Mozzo Rendering

Posted on October 21, 2011 by Milhaus Development

Here is a new rendering of the Mozzo Apartments, which we have proposed to be developed at 531 Virginia Avenue in the Holy Rosary Neighborhood in downtown Indianapolis. The 4-story mixed-use building comprised of 64 units and a corner cafe space are designed to provide flexibility with the new Cultural Trail. North of the corner space, the first floor spaces will be available for residential or commercial uses. The building will include a mix of studios, one bedroom and two bedroom units. We plan to start construction in the first quarter of 2012.

Photos

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This entry was posted in Project Highlight, USA Midwest

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Two new businesses opening at University Square

Posted on October 10, 2011 by Milhaus Development

Milhaus Development, LLC announces two additional businesses have signed leases to open at University Square in Muncie, Indiana. Cleo’s is the second endeavor for Chris Ellison, owner of Silo Bar and Restaurant in downtown Muncie. Also cardinal cupcakes and coneys will bring a new concept to the market.

University Square, purchased by Milhaus in May 2011, is a shopping center in the heart of the village near Ball State University’s campus. Construction has already begun on Cleo’s in the 3,350 square foot space at the corner of Martin Street and University Avenue. The bar and restaurant plans to open in December.

Melissa Bucur, a BSU alumna, will open cardinal cupcakes & coneys in 1,530 square feet on Martin Street later this fall. The restaurant will feature cupcakes, coneys, hot dogs, nachos, and New England coffee. “I am excited to see The Village get back to what I remember it as when I was a student on the BSU campus,” said Bucur. “Milhaus is doing an amazing job to restore University Square back to a great place for students and the community.”

Together they join Dill Street Bar and Grill and Oh Fusion Sushi, which also recently signed leases to remain at University Square.

“What makes the Village so attractive to businesses are the thousands of customers that live within walking distance,” said David Leazenby, Principal, Milhaus Development. “We believe the Village can become a model of campus area shopping districts in the nation. University Square is only one piece of the puzzle, and it is proving to be an attractive location for business.”

For information on other spaces available at University Square, please contact Gregg Donaldson, Milhaus Realty, at gregg.donaldson@milhausrealty.com or check out the listings here.

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The Mozzo Apartments

Posted on October 06, 2011 by Milhaus Development

This week we filed more detailed plans with the City of Indianapolis for our planned redevelopment of the former BMV at 531 Virginia Avenue in the Holy Rosary Neighborhood into a mixed-use building. The Mozzo (meaning “hub” in Italian) will contain 64-units and 1,700 square feet of café space along the new Cultural Trail set to open here in 2012. Its contemporary design by Blackline Studio for Architecture in Fountain Square is intended to complement the area’s mix of historic and modern architecture.

The $5.8 Million investment will include studios, one-bedroom, and two-bedroom units. A unique feature of the building will include first floor studios along the Cultural Trail that are designed to be flexible for residential or commercial uses. In addition, the plans call for public art at the corner of Virginia Street and Merrill Street to identify the Holy Rosary Neighborhood and its historic significance to the City of Indianapolis.

Ground breaking on the 0.82-acre site is projected to be in the first quarter of 2012, with project completion by the end of 2012.

Photos

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This entry was posted in News

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Making Mixed Use Work Financially (Part Three)

Posted on August 26, 2011 by Milhaus Development

For the last few weeks we have been exploring the financial differences between two different buildings – a four-story building consisting of all apartments vs. a four-story building with commercial space on the first floor. Of course, the differences are found in many variables, including construction costs, market rental rates, parking availability, financing terms, etc. The biggest factor affecting the ability to do mixed-use in predominately residential neighborhoods is the rental rate on the retail. Most small market, small business owners operating café spaces cannot pay typical $20NNN-plus and run a successful business. Developers that have forced more commercial space onto a site know that it can compromise the feasibility of the overall project. Further, if for some reason it is included and then underperforms, it presents a negative image of the project and undermines the leasing of the residences. It’s our job to bridge this gap through design and construction in order to deliver space that works for both developer and tenant, yet provides a desirable use for the neighborhood.

Download the full proforma here:
Milhaus Mixed-Use Proforma Compare Full.pdf

In last week’s post, we demonstrated what happens to the proforma during the permanent financing in each of these two building types. Let’s look at the overall value of the project and how much is created in the investment. Notice the apartment building actually receives more loan dollars at refinance since it will have a lower cap rate at its sale than the building with commercial in it (7% v. 7.25%). Appraisers simply do not value the space the same. So, looking at stabilized NOI, the projects are yielding very similar amounts at around $500,000. However, in the mixed-use example, it cost $850,000 more to get that same return. After the different exit cap rates are applied, you can see the value created is $543,734 more if you develop the apartment building on the left. So, which building would you develop?

Today’s economy is characterized by high commercial vacancy rates, low residential cap rates, investors flocking to safety, and high demand for urban apartments in walkable environments. However, without free parking, TIF, tax abatement, or some other subsidy; it is nearly impossible to develop apartments on top of all-commercial space in a mid-market city today. This combination of factors is causing us to pursue buildings with very limited commercial space (all wood construction) and in only the most outstanding locations. If designed and built correctly, these buildings can still add a lot of value to both investors and neighborhoods. Let us know if we can help you with your next project.

This entry was posted in Finance

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Does Mixed Use Really Work? (Part Two)

Posted on August 19, 2011 by Milhaus Development

Today, we are following up with Part Two of our pro forma analysis of two different building types with a focus on operating income and permanent financing. See Part One here for an introduction and a look at the construction costs of both buildings. Download the pro forma for today’s discussion here:

Milhaus Mixed-Use Proforma Compare Part 2.pdf

We are assuming retail rents to be a conservative $14NNN at a neighborhood commercial type location. The residential rents average $1.42 per square foot. The “apartments-only” building yields an 8.71% unleveraged return versus 7.70% for the “apartments over retail” building. To arrive at the revenue numbers for each type, we have assumed a typical vacancy amount and some additional income such as parking and premiums. The NOI is fairly similar in each type at about $500,000. However, as you can see, that difference of about $850,000 between the two project costs as mentioned last week has significantly affected the return by 101 basis points.

Now, this is where it gets even more difficult. Upon permanent financing there is a major difference in how much of the invested dollars can be taken out of the project (about $1,000,000 difference). This dramatically lowers the cash-on-cash return, not to mention the fact that you can’t pull your money out and use it for the next project. Since the mixed use building had about $644,000 higher construction loan, there is that much more to pay back. So, the NOI and Cash Flow are similar on the two buildings; but the coverage ratio, expensive construction, lack of sufficient retail rent create a busted pro forma on the mixed-use side. We don’t have to ask our investors which building they want to have their money in: 8.6% versus 26.3% cash returns.

Next Friday we'll summarize the analysis and present the value of each building type after a sale with their respective cap rates.

This entry was posted in Finance

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Does Mixed Use Really Work? Part One.

Posted on August 12, 2011 by Milhaus Development

We are often requested to explore projects with entire first floors of retail with two or three levels of apartments on top. There are actually some cities that require some degree of commercial space at the ground level of every new building. While we appreciate the amenity that such a use can provide for residents, there are very few markets that support that amount of commercial space. In fact, there is often no financial reason to do it. It usually requires a dense urban market where barriers to entry are very high (eg. New York, Chicago, San Francisco) or some form of subsidy (eg. free land, free parking, TIF, tax abatement, etc.).

To do it in a mid-market city, it requires shrinking the retail space down to a very limited component of the project (see our project that we filed in Indianapolis yesterday as an example). The solution in most places is to keep it in all wood construction and provide flexibility in the design so that it can also be residential space or office space or whatever the market brings. To illustrate, we’ve created an example that is compiled from two different projects that highlights the financial differences between these two building types. Today, we’ll look at the construction costs. Next week, we’ll examine the operational revenue and expenses and finally the results of permanent financing and financial returns to investors.

Our example today (download below) includes the following assumptions to begin looking at the construction side of the deal: identical sites in a mid-market urban area, 4-story buildings with surface parking. On the left is “apartments-only” and all wood construction. For purposes of our illustration, the "apartments-only" building could have a small amount of retail in place of one or two apartments and it would not materially change the numbers. The right column assumes “apartments over retail” with an entire steel first floor and wood construction sitting on top of it. Our “apartments-only” building has 67 units. Our “apartments over retail” building includes 50 units and 12,260sf of commercial space. You can see the differences in pricing according to type. Customary build-out numbers are assumed for the commercial space. The total project costs are $858,715 greater or 15% more in the mixed-use building. Assuming a loan-to-cost ratio of 75%, this translates into $214,679 more funds required to get the construction loan. While significant, this by itself isn’t a deal breaker; but we’ll see when we look at the operational expenses and revenue of the two different parts of the project how these smaller differences result in big financial hits to the returns and feasibility of the project. Let us know if you have any comments or questions. Check back next week for Part Two as we continue diving into it.

Download proforma sheet here: Milhaus Mixed-Use Proforma Compare Construction.pdf

This entry was posted in Finance, Our Philosophy

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New Project Downtown Indianapolis

Posted on August 11, 2011 by Milhaus Development

Milhaus Development, LLC is pleased to announce plans for a new mixed-use building in downtown Indianapolis. The project will redevelop the former Bureau of Motor Vehicles site at 531 Virginia Avenue, in the Holy Rosary and Fletcher Place Neighborhoods just southeast of the downtown core.

Today we filed plans with the City of Indianapolis for rezoning of the property to allow for a change in height. Our site plan and building elevations are shown below. We continue to refine the design and anticipate filing for Regional Center approval within the next 3-4 weeks. The project, with a name to released soon, will include a 4-story mixed-use building that includes 64 apartment units and approximately 1,670sf of ground floor commercial space. The site is in walking distance to major employers, cultural attractions, and sports facilities. Located directly along the new Cultural Trail Southeast Corridor, the building will be an ideal environment for residents who work downtown and value living in a unique cultural hub.

Milhaus has contracted with Blackline Studio to be architect of the project. Blackline has been active in the recent revitalization of the surrounding neighborhoods with other mixed-use projects such as The Hinge and Fletcher Place Terrace.

Civil and Environmental Consultants, Inc. (CEC) has been selected as the project engineer. With 13 offices employing over 350 people across the United States, CEC is a proven industry leader and its Indianapolis office has worked on several other Milhaus projects.

Ground-breaking is projected to be in the first quarter of 2012, with project completion by the fourth quarter of 2012.

Photos

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This entry was posted in News

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Oh Fusion and 420 Underground at University Square

Posted on August 10, 2011 by Milhaus Development

Milhaus Development, LLC is pleased to announce that two additional businesses, 420 Underground and Oh Fusion Japanese have signed new leases to remain in their respective spaces at University Square in Muncie, Indiana.

University Square, purchased by Milhaus in May 2011, is a shopping center in the heart of the village near Ball State University’s campus. 420 Underground will remain in its existing space, of approximately 800 square feet, at 420 N. Martin Street for at least another three years. The tobacco shop is a subsidiary of Wishbone Gifts in downtown Muncie.

Oh Fusion will also remain in its existing space, of approximately 2,600 square feet, at 1609 West University Avenue for at least another three years. The Asian restaurant offers a menu of Japanese, Chinese and Korean cuisine, as well as a full sushi bar. Open for lunch and dinner, the restaurant is a great dining choice for young people and families alike.

They join the Dill Street Bar and Grill which also recently signed a new lease to remain at 421 N. Dill Street for another three years.

“The village is a shopping district that will be successful because of the variety of goods and services it provides,” said David Leazenby, Principal, Milhaus Development. “Continuing to grow and foster that variety is one of the visions that we have for University Square. Retaining 420 Underground and Oh Fusion are great steps toward reaching that goal.”

For information on other spaces available at University Square, please contact Gregg Donaldson, Milhaus Realty, at gregg.donaldson@milhausrealty.com.

This entry was posted in News

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Older Posts

07.27.11 - Milhaus Issues Resolution to Support Transit Referendum by Milhaus Development
07.13.11 - David Leazenby named to Stanley K. Lacy Executive Leadership Series Class XXXVI by Milhaus Development
06.23.11 - Tadd and David discuss University Square at Ball State University by Milhaus Development
06.13.11 - Construction at the Maxwell by Milhaus Development
05.21.11 - Milhaus at ICSC RECon 2011 by Milhaus Development
05.20.11 - Randhurst Mall to Newbury Street and Back by Milhaus Development
05.10.11 - Milhaus Purchases University Square Near Ball State Campus by Milhaus Development
05.04.11 - Let’s Put Cars Back on the Ground - Brian Suiter by Milhaus Development
05.02.11 - Tadd Miller in IBJ's "Who's Who in Commercial Real Estate" by Milhaus Development
04.26.11 - The Conversation Keeps Coming Up. So Does the Price. by Milhaus Development
04.18.11 - Light Up the Night by Milhaus Development
04.15.11 - First Commercial Tenant to Lease Space at The Maxwell by Milhaus Development
03.30.11 - Tadd Miller in ULI Magazine by Milhaus Development
02.16.11 - Milhaus receives approval to develop 193 units in Carmel, IN by Milhaus Development
02.14.11 - Milhaus relocates to the Maxwell by Milhaus Development
02.07.11 - Beyond 2012 (Super Bowl Legacy, Part 3) by Milhaus Development
01.14.11 - Beyond the "State of Real Estate" by Milhaus Development
12.29.10 - An Exciting Start – Celebrating Milhaus’ Anniversary by Milhaus Development
12.21.10 - Glick/Milhaus investment group purchases The Maxwell Apartments by Milhaus Development
11.16.10 - Milhaus redesigns website and blog due to increasing traffic by Milhaus Development
11.15.10 - Emerging Trends by Milhaus Development
11.10.10 - Winter Farmer's Market Set to Open Saturday at the Maxwell by Milhaus Development
11.01.10 - Milhaus Selected to Provide Real Estate Services to LISC by Milhaus Development
08.18.10 - Southwest Florida’s Mixed-Use; Bayfront Center by Milhaus Development
08.16.10 - Mixed Use Density Capped by Costs by Milhaus Development
08.13.10 - Southwest Florida’s Mixed-Use: The Strada at Mercato by Milhaus Development
08.12.10 - Greyfields: A Mixed Use Dream? by Milhaus Development
08.11.10 - Milhaus Sponsors Jeff Speck in Carmel, IN by Milhaus Development
07.29.10 - Allen Plaza by Milhaus Development
07.29.10 - City Market. Is it enough? by Milhaus Development
07.26.10 - South Florida's Mixed Use by Milhaus Development
07.19.10 - SKL Leadership series names 35th class by Milhaus Development
07.12.10 - “Third Thursdays” turns to Milhaus by Milhaus Development
07.01.10 - Car Size Matters by Milhaus Development
05.26.10 - What is mixed use development? – Part Two by Milhaus Development
05.22.10 - Milhaus lands in Las Vegas by Milhaus Development
05.19.10 - What is mixed use development? – Part One by Milhaus Development
05.13.10 - What do we stand for? by Milhaus Development
05.07.10 - What do we see? by Milhaus Development
04.27.10 - What is Milhaus? by Milhaus Development