December 4, 2018 at 8:39 am
In multi-part series, exclusive to the Maine Real Estate Insider, we’ll provide an up-close look at the most notable commercial development projects of the past year that are helping to fuel Maine’s economy in terms of investment and job creation. MEREDA is proud to recognize responsible development based upon criteria including environmental sustainability, economic impact, energy efficiency, difficulty of the development, uniqueness, social impact and job creation.
Please join with us in celebrating 65 Munjoy Street Condominiums.
MEREDA: Describe the building and project.
65 Munjoy Street Condominiums: 65 Munjoy is a partnership between local Portland developers Peter Bass of Random Orbit and Ethan Boxer-Macomber of Anew Development.
65 Munjoy Street is a three-story, walk-up building offering 8 high-quality and amenity rich condominium units in a range of 1, 2 and 3-bedrooms. 65 Munjoy presents the best of modern design and materials while respecting the traditional architectural forms, organization and massing that characterize Munjoy Hill.
Most importantly, 65 Munjoy is a unique and innovative response to Portland’s call for quality and efficient ownership housing created to be affordable to middle-income buyers. While the housing units at 65 Munjoy would appeal to buyers in any segment of the market, they were designed and developed to be sold at reduced price points and made available exclusively to buyers with maximum household incomes at or below 120% of the Portland area median income.
MEREDA: What was the impetus for this project?
65 Munjoy Street Condominiums: As Portland has grown in recent years it has actively produced hundreds of new workforce housing units for low-income residents as well as scores of new houses and condominium units for people of higher than average means. However, in that same period, the typical moderate-income resident experienced a concerning decline in affordable housing options.
Being Portland residents themselves, Bass (Peter) and Boxer-Macomber (Ethan) had each participated over the years in an ongoing community dialogue about the problem of suppling new housing opportunities for middle-income residents. While this problem had been the topic of much study, discussion, and debate- Peter and Ethan had seen few tangible solutions had come out of the development community.
They decided it was time to apply their housing skills and experience toward creating a tangible housing project that would seek to address the problem and perhaps provide a model that could be replicated.
MEREDA: That sounds like quite a process. How long were you in the planning stages before construction started?
65 Munjoy Street Condominiums: Before ever starting the project, the developers had spent years contemplating and sketching potential ways to viably create affordable middle-income housing, but it wasn’t until 2014 that a feasible and tangible opportunity presented itself.
In that year, The City of Portland released a Request for Proposals (RFP) for the sale and reuse of an 80’ x 85’ vacant parcel of land it owned at 65 Munjoy Street. The City’s RFP was crafted in such a way that it required the creation of affordable housing generally, but was wisely left flexible and non-prescriptive in terms of affordability strategy; e.g. apartments vs. condos, level of income targeting, design of units, legal framework for income restrictions, etc. The City’s RFP also offered ways that the City could potentially assist in the creation of affordable housing through both the terms of sale and with various potential forms of soft secondary financing.
It was the City’s flexible, non-prescriptive approach to the RFP, combined with flexible finance opportunities that made it possible for the developers to see a feasible path forward towards creating middle-income condominiums.
The developers planned and prepared their response in late 2014 and submitted a response to the RFP in January of 2015. The developer’s response was reviewed through a series of public meetings and accepted by the City Council later that year. Through late 2015 and into late 2016, the developers negotiated project costs, financing, and City and State land use and environmental permitting.
Construction of 65 Munjoy started in the summer of 2016, was completed in the spring of 2017. The final unit was sold in the summer of 2018.
From first consideration to the sale of the final unit, the project took almost exactly 4 years.
MEREDA: Tell us about the most challenging aspect of getting this project completed.
65 Munjoy Street Condominiums: Over the 4 years that the developers planned and implemented the project, they experienced numerous challenges such as environmental mitigation, legal and financial terms negotiation with strategic partners, a frivolous NIMBY law suite, escalating material and labor costs, and all of the delay and expense associated with each.
While each of these challenges was significant, they were all potential risks that the developers understood and had prepared for. In the end, it was the challenge least expected that turned out to be the greatest….
*See “Something unexpected” below.
MEREDA: Something unexpected you learned along the way was….
65 Munjoy Street Condominiums: When the developers managed to devise a plan that would create hi-quality, highly desirable new units in the heart of Munjoy Hill priced aggressively below market value, the assumption was that all 8 units would probably be under contract before construction ended. In the end, however, only one unit went under contract during construction and it took a full 14-months for the market to absorb the remaining seven.
The slow absorption at 65 Munjoy was by no means for lack of excitement in the market. Each passing month the sales team fielded a steady stream of would-be buyers that enthusiastically inquired about the property, scheduled showings, and floated offers.
The problem was that the very large majority of inquires hit dead ends with the would-be buyers earning either too little or too much to qualify. Several of the buyers assumed that they would be 120% AMI income eligible but came to find that they were just slightly over income. Others had income soundly below 120% AMI but then struggled to pull together the down payment and loan approvals needed to satisfy their lender.
The window of Portland area buyers who who’s earnings were modest enough to meet the income restrictions but high enough to secure financing turned out to be far more narrow than expected.
MEREDA: Now that it’s complete, what feature of the project do you think makes it the most notable?
65 Munjoy Street Condominiums: The developers are extremely pleased and proud to have contributed positively to the current urban renaissance of Munjoy Hill following over 60 years of disinvestment, deferred maintenance, and population loss. The 65 Munjoy project addressed pre-existing environmental concerns, added to the social and economic vitality of the neighborhood and created and sustained local jobs while also adding new revenue to the City’s tax rolls.
However, despite all of these successes, 65 Munjoy’s most notable feature is clearly the way that it provides precious, one-of-a-kind opportunity for middle-income residents to own a quality new condominium unit on Munjoy Hill at price point they can afford.