Economic Vitality Commission · Thursday, April 23, 2026 · City Council Digest

3. AGENDA ITEMS

Building 101 The purpose of this special meeting is to allow the Economic Vitality and Planning Policy Commissions to participate in training and discussion related to promoting building investments in Issaquah

Discussion

Topics: Economic Development

2433 segments .txt ↗

0:01 ↗ Amanda,

0:09 ↗ >> Amanda.

0:15 ↗ >> All right. Well, welcome everyone.

0:19 ↗ It's great to catch up with everybody.

0:21 ↗ We want to begin though, and I want to

0:22 ↗ welcome EVC. It's been a long time since

0:25 ↗ we've seen one another. want to welcome

0:27 ↗ all of our guests here who are probably

0:29 ↗ going to speak tonight. Um, but let's

0:32 ↗ get started by opening up this special

0:34 ↗ meeting of the EVC and the Planning

0:36 ↗ Policy Commission. And it's currently

0:37 ↗ 5:31 p.m. Today's meeting is a hybrid

0:41 ↗ meeting. It is in person, but staff or

0:43 ↗ members of the public may be attending

0:45 ↗ virtually or in person. I'm going to go

0:48 ↗ out on a limb and say we probably do

0:49 ↗ have a quorum this evening.

0:52 ↗ >> Yes, we do.

0:53 ↗ >> Okay. and I want to get to

0:55 ↗ introductions, but I also want to let

0:57 ↗ people speak first in case they have

0:58 ↗ somewhere to go. So, tonight we're going

1:01 ↗ to offer up some time to do a public

1:03 ↗ comment. And first of all, has anyone

1:06 ↗ signed up for public comment?

1:14 ↗ >> No.

1:15 ↗ >> No.

1:17 ↗ >> Would anyone like to speak?

1:23 ↗ >> Okay.

1:24 ↗ Okay. But having said that, we do want

1:26 ↗ to offer some guidelines. So, first of

1:28 ↗ all, for anyone that would like to

1:30 ↗ speak, we ask that you come up to where

1:31 ↗ Kristen is and speak clearly and pause

1:33 ↗ frequently. Please state your name uh

1:36 ↗ before you speak. And if we have any

1:38 ↗ virtual attendees, we ask that you speak

1:41 ↗ um during the public comments that you

1:43 ↗ mute when you are not speaking. And if

1:45 ↗ you're having any technical issues, you

1:47 ↗ can try rejoining the meeting using a

1:49 ↗ different device such as a smartphone or

1:50 ↗ tablet. And you can use the call-in

1:52 ↗ information in the meeting invite to

1:54 ↗ join. We take these seriously. They are

1:57 ↗ important part of the public process.

1:59 ↗ They are factored into the decisions

2:01 ↗ that we make and we do ask that people

2:03 ↗ keep their public comments to five

2:05 ↗ minutes or less. Okay, we want to begin.

2:08 ↗ So I think there are some hands for

2:11 ↗ public comment.

2:16 ↗ Okay,

2:18 ↗ perfect. Thank you. All right. Well, I

2:20 ↗ do want to it's been a long time since

2:21 ↗ we've met together, so I want to go

2:23 ↗ around the room real quickly and have us

2:25 ↗ introduce one another. Um, you can let

2:27 ↗ us know what board commission you're on

2:29 ↗ and maybe just one thing that you enjoy

2:32 ↗ about serving on your commission. And

2:34 ↗ I'll start. Um, Jason Voice, I've been

2:37 ↗ on the planning policy for a while. I

2:39 ↗ enjoy doing the work of the public. It's

2:42 ↗ a lot of fun looking through

2:44 ↗ different regulations that hopefully

2:46 ↗ make our city better. That's the idea. I

2:48 ↗ think that's the goal we all have. But

2:50 ↗ uh yeah, that's what I enjoy. I I enjoy

2:52 ↗ doing homework. I'm a nerd. So, I'll

2:54 ↗ start there. Okay.

2:56 ↗ >> I'm John Crass. I'm the PPC. Been doing

2:58 ↗ it for two years.

3:01 ↗ Been in Isqua for 10 years, 20 years

3:02 ↗ before that in Seamish. And one of the

3:04 ↗ things that I love is helping make uh

3:07 ↗ Isqua a better livable place for not

3:10 ↗ just now, but in 10 years from now.

3:15 ↗ Hi, I'm uh Eric Allener, also a public I

3:18 ↗ mean uh uh policy planning commission

3:21 ↗ planning policy commission commission of

3:23 ↗ planning policy.

3:25 ↗ Um I've been on it for about a year or

3:29 ↗ two years, something like that. Um I

3:32 ↗ want to echo what Jason was saying. I

3:34 ↗ think we are all here trying to make

3:36 ↗ Isqua a better city. Uh my particular

3:39 ↗ interest is in affordable housing.

3:43 ↗ Uh my name is Jesse Patterson. I am on

3:45 ↗ the PPC. I've been a resident Isiqua for

3:48 ↗ about 14 years and on the commission for

3:50 ↗ about four of those years. And uh I just

3:53 ↗ like hearing um different perspectives

3:55 ↗ from different uh people across the the

3:58 ↗ our community and helping use those

4:02 ↗ perspectives to guide our planning

4:03 ↗ policy.

4:07 ↗ >> Hi, my name is Sandy Matthews and I'm

4:09 ↗ also with the planning policy

4:10 ↗ commission. Um I've been on for about a

4:12 ↗ year and I've lived in Isqua for a long

4:14 ↗ time about 23 years I think. And um the

4:19 ↗ thing I really wanted to do was because

4:21 ↗ I have a background reviewing

4:24 ↗ um different kind different cities their

4:26 ↗ policies. I'd actually wanted to their

4:29 ↗ planning commissions and such. I' I

4:30 ↗ really wanted to be involved and use

4:32 ↗ some of my background hopefully to help

4:34 ↗ um make some changes or make for the

4:36 ↗ better for our city.

4:40 ↗ Good evening. Kata Zakarov, a resident

4:42 ↗ of Isiqua Highlands for about six years

4:45 ↗ and on planning policy commission for

4:47 ↗ about two years. And I have joined the

4:49 ↗ commission because I would like to learn

4:51 ↗ more about the city and also to help it

4:53 ↗ grow and to see it grow into the future

4:55 ↗ and hopefully we can do something good

4:58 ↗ with our policies and help our city grow

5:01 ↗ good. Thank you.

5:04 ↗ >> Good evening. Kelly Richardson and I am

5:07 ↗ with Economic Vitality Commission. I

5:09 ↗ have been on the commission for about

5:11 ↗ two years now. I love jobs and having

5:14 ↗ jobs give people a sense of pride and

5:17 ↗ they have the ability to also then help

5:19 ↗ other people through all that um as well

5:22 ↗ as um our retaining our businesses um

5:26 ↗ both large and small um and affordable

5:29 ↗ housing. All of those elements make a

5:31 ↗ great community.

5:35 ↗ Hello, I'm Kimberly Capistant. I'm new

5:37 ↗ to the Economic Vitality Commission, but

5:40 ↗ I'm six years uh just coming off of the

5:42 ↗ arts commission for the city of Isiqua.

5:45 ↗ I'm also the DMO for the city of Isiqua,

5:48 ↗ which means I'm the destination

5:49 ↗ marketing uh organization that helps

5:52 ↗ bring tourism to Isiqua. So part of what

5:56 ↗ my job is is to really um decide on, you

6:00 ↗ know, how to market best those wonderful

6:03 ↗ entities that we have here. We're also

6:05 ↗ known as an outdoor recreation um halo

6:09 ↗ city for not only Seattle but Belleview

6:12 ↗ and working with those partners to try

6:14 ↗ and bring in more revenue for Isiqua. So

6:17 ↗ thank you so much.

6:22 ↗ >> Good evening. I'm Jennifer Larson and

6:25 ↗ I'm not a resident of Isiqua, but I am

6:28 ↗ part of the business community. I work

6:30 ↗ with Sanmar. I've been there about 10

6:31 ↗ years and what I really enjoy about

6:33 ↗ being part of the economic vitality

6:35 ↗ commission is a chance to participate in

6:37 ↗ and give back to the community and

6:38 ↗ Isiqua is a wonderful community to do

6:40 ↗ that in.

6:43 ↗ >> Hi everybody, my name is Robert Lurch

6:45 ↗ and uh lived in Isiqua for 20 years. I

6:48 ↗ the owner of Pickles Playland. We're a

6:50 ↗ doggy daycare downtown. And um one of

6:54 ↗ the the the highlights for me for being

6:55 ↗ part I'm part of the EVC is that at the

6:58 ↗ very end of our meeting we go around and

6:59 ↗ talk about new businesses coming to town

7:01 ↗ and who knows about what's happening and

7:04 ↗ kind of getting the the insider

7:06 ↗ knowledge about who's coming and I I

7:07 ↗ love that part. So thanks guys.

7:12 ↗ >> Hi my name is Kim Lee. Uh I work at

7:15 ↗ Broadstone uh and also associated with

7:18 ↗ Lakeside Industries, a manufacturing

7:20 ↗ business here in town. Uh I'm a resident

7:22 ↗ of Isiqua and I've been for the last

7:25 ↗ four years and on the economic vitality

7:27 ↗ commission for about that long as well.

7:29 ↗ Um I believe strongly in the economic

7:32 ↗ vitality in Isiqua. And so by that um I

7:35 ↗ mean you know a vibrant employment

7:38 ↗ center where people can also live and

7:41 ↗ those two things go hand in hand.

7:45 ↗ Good evening. My name is Chris Richley.

7:46 ↗ Uh been on the economic vitality

7:49 ↗ commission for six years now going on a

7:52 ↗ 14-year resident. Also work in Isiqua at

7:54 ↗ the Harborstone Credit Union. I also

7:57 ↗ echo what Kim's saying as far as being

7:59 ↗ able to live, engage, and actually, you

8:01 ↗ know, work in the same community is

8:04 ↗ important. So affordable housing falls

8:05 ↗ into that. Also, I'm a big believer in

8:07 ↗ big small businesses big business. big

8:09 ↗ business doesn't exist unless small

8:11 ↗ business was ever formed, right? So,

8:14 ↗ anything and everything business is what

8:15 ↗ I'm, you know, I'm about. I'm from from

8:17 ↗ a small business family. So, that's

8:19 ↗ that's what drove me to the EVC.

8:24 ↗ I am Brett Holmstrom, incoming member.

8:27 ↗ Oh, I got have a name tag now on the

8:30 ↗ PPC. Isqua resident for about five

8:33 ↗ years. because I'm a small home builder

8:35 ↗ in town and hope to use that background

8:38 ↗ to help uh planning going forward to

8:41 ↗ smooth things out a little bit.

8:46 ↗ >> Good evening everyone. My name is Leslie

8:47 ↗ Millinder Irwin. Um I am a commissioner

8:50 ↗ on the PPC. Um is resident for three

8:54 ↗ years. Um I am very passionate about uh

8:58 ↗ affordable housing and uh specifically

9:01 ↗ uh senior housing. I believe that um

9:04 ↗ it's very important to make sure that

9:05 ↗ our our seniors have a safe place to

9:07 ↗ live and a safe beautiful place to live.

9:10 ↗ So um I am uh very happy to be involved

9:13 ↗ in uh volunteerism with the city. Thank

9:15 ↗ you.

9:20 ↗ >> Hi, I'm Genevieve Adair. I've been with

9:23 ↗ the planning policy committee for about

9:24 ↗ a year now. I've lived in Isiqua about

9:27 ↗ two or three years now. Um, I love

9:31 ↗ Isiqua and I just hope to help maintain

9:34 ↗ its charm and everything that's great

9:37 ↗ about it. So, that's why I'm here. I

9:39 ↗ love learning the nuts and bolts of city

9:41 ↗ management and code as well. It's a good

9:43 ↗ break from my day-to-day life.

9:48 ↗ >> We all love code.

9:50 ↗ All right. Well, thank you. It's great

9:52 ↗ to meet all of you. I know I've met some

9:54 ↗ of you, Chris. I've known a long time

9:55 ↗ and Kim and but it's always good to uh

9:58 ↗ get to know our new commissioners and

10:00 ↗ say hi and I hope everyone got some

10:02 ↗ pizza in our audience. Okay, we're going

10:04 ↗ to move on to our agenda because we

10:06 ↗ don't have a lot of time together so we

10:08 ↗ want to make the most of it. So the

10:10 ↗ purpose of this special meeting is to

10:11 ↗ allow the economic vitality and planning

10:14 ↗ policy commissions to participate in an

10:17 ↗ overview and discussion related to

10:18 ↗ promoting building investments in

10:20 ↗ Isiqua. We're going to hear

10:22 ↗ presentations from staff and also from

10:24 ↗ developers.

10:26 ↗ Um, one thing I'm going to ask from our

10:28 ↗ participants around this table is if you

10:30 ↗ do have a comment, please go ahead and

10:33 ↗ raise your placard so we don't have a

10:34 ↗ free-for-all. This will make it a little

10:36 ↗ bit easier on staff and myself so we can

10:38 ↗ pick people and make sure everyone's

10:40 ↗ getting a fair amount of time to speak.

10:43 ↗ So Kristen Leon, our planning manager,

10:45 ↗ is kick

10:50 ↗ is gonna be

10:51 ↗ >> theatrical here.

10:53 ↗ >> Uh Kristen Leon, our planning manager,

10:55 ↗ will be kicking it off this evening. So

10:56 ↗ Kristen, when you are ready, please go

10:58 ↗ ahead.

11:20 ↗ All right. Thank you all for coming

11:22 ↗ tonight. This is great. Um and really we

11:25 ↗ have four giant pizzas in the room. So

11:28 ↗ feel free to get up and drinks. Feel

11:29 ↗ free to get up at any time and go go get

11:31 ↗ those. This is not a super formal

11:33 ↗ meeting. So um I don't want to take it

11:35 ↗ home. Um yes we are here to talk about

11:40 ↗ promoting building investments in

11:42 ↗ Isiqua. So in back in 20

11:47 ↗ maybe

11:49 ↗ there we go.

11:51 ↗ So, we adopted the central Isiqua plan

11:55 ↗ back in 2012

11:57 ↗ and with the idea of focusing all of our

12:00 ↗ future growth in on the valley floor in

12:03 ↗ central Isiqua primarily off of the

12:05 ↗ hillsides. Um, part of that was so that

12:08 ↗ we could get transit, which we hope is

12:10 ↗ coming our way. Um, and there was a lot

12:13 ↗ of redevelopable land down there. So,

12:15 ↗ that was that was a good place to put

12:16 ↗ it. we needed to be able to meet have

12:18 ↗ our capacity to meet our targets, our

12:20 ↗ statemandated housing and jobs targets

12:21 ↗ that we get every year as well.

12:24 ↗ Um we're particularly interested in

12:26 ↗ growing in our regional growth center

12:27 ↗ which is the green area up there. It

12:31 ↗ our regional growth center we were um

12:34 ↗ designated as such in 2015.

12:37 ↗ It is having one of these that means

12:39 ↗ that that is where the city is supposed

12:41 ↗ to focus its future growth. It also

12:44 ↗ means that is where transit will go. It

12:46 ↗ also puts us higher up when we apply for

12:48 ↗ grants for infrastructure. It puts us

12:50 ↗ higher up um in line when we apply for

12:53 ↗ infrastructure funding from the Puet

12:55 ↗ Sound Regional Council and other and

12:57 ↗ other government agencies. So, it's

12:59 ↗ important that retain that status and

13:02 ↗ they need to see progress going forward.

13:04 ↗ So, we need to see more growth there.

13:07 ↗ So, there are several development

13:08 ↗ factors um as you all know when when

13:11 ↗ developing. You've got the land use

13:13 ↗ regulations which are way up here at the

13:14 ↗ top. You can see those. Those are easy

13:16 ↗ to touch, right? Piece of paper, you can

13:17 ↗ change it. Um but you also have market

13:19 ↗ factors. You have um construction costs,

13:22 ↗ taxes, tariffs, land costs, all these

13:25 ↗ things that we don't have a lot of

13:27 ↗ control over. Um one another one we have

13:30 ↗ control over the land regulations and we

13:32 ↗ have control over partnerships. So those

13:34 ↗ are the two things that we are focusing

13:35 ↗ on right now.

13:42 ↗ little lag time.

13:46 ↗ There we go. They we have four key

13:49 ↗ strategies um that we're working from.

13:51 ↗ One is to remove our regulatory barriers

13:53 ↗ which is through the land use code.

13:55 ↗ Improve our permit processes which is

13:57 ↗ something that we've been working on

13:58 ↗ since 2022 when we had a national

14:00 ↗ consultant come in and say, "Hey, here's

14:02 ↗ how you can work on improving things and

14:04 ↗ make it more efficient." We can create

14:06 ↗ incentives through the land use code and

14:08 ↗ through programs that are out there and

14:11 ↗ we can also do proactive marketing um

14:14 ↗ for investments in the city.

14:17 ↗ So we're doing that through builder

14:19 ↗ outreach and communication and we want

14:21 ↗ to really create a momentum and change

14:24 ↗ perceptions. You know not isqua is such

14:26 ↗ a hard place to build but isqua is

14:28 ↗ willing to work with you and look what

14:31 ↗ they've done to change their code and

14:32 ↗ look at the processes that are out

14:33 ↗ there. These these are improved. It's

14:35 ↗ not perfect, but gosh, it sure is going

14:37 ↗ the right direction, right? The other

14:39 ↗ one is to build relationships and trust.

14:41 ↗ So, I don't I don't know how many of you

14:43 ↗ know, we've started meeting with we've

14:45 ↗ started having a builder round table and

14:47 ↗ discussing with smaller and larger home

14:50 ↗ builders what's working, what's not,

14:53 ↗ where can we make improvements, oh, here

14:54 ↗ are some things that we've got going on

14:56 ↗ that we can't change. It's just been a

14:57 ↗ nice conversation

15:00 ↗ um talking about how to fix speed and

15:02 ↗ predictability and flexibility and

15:04 ↗ clarity so that when developers come in

15:06 ↗ it makes it easier for everyone all

15:08 ↗ around.

15:10 ↗ So out of all this also as part of the

15:13 ↗ land use code we have several

15:14 ↗ amendments. So 15 different amendments

15:17 ↗ were proposed. Uh they came from a

15:20 ↗ council retreat talking to different

15:21 ↗ homebuilders from staff. as we see

15:23 ↗ things come in, we keep a running list

15:25 ↗ of things that didn't work. We might

15:27 ↗ need to fix this. And then back in 2023,

15:30 ↗ we updated our Title 18 land use code

15:32 ↗ and created a whiteboard. There were

15:34 ↗ some things that were just too big to

15:35 ↗ touch during that process. And so, we're

15:37 ↗ working on getting those done as well.

15:39 ↗ All in all, some of these were combined.

15:42 ↗ Um, we are doing about 37 of these. Some

15:45 ↗ are in process. The others are being

15:48 ↗ done and they're part of this list that

15:49 ↗ I'm going to show you. Um there are

15:53 ↗ there are 17 things. We've got it mapped

15:54 ↗ out by quarter. We're taking two to our

15:56 ↗ city council on June 29th. They have a

15:59 ↗ public hearing coming up on May 14th.

16:01 ↗ We're actually going to talk about those

16:02 ↗ tonight if anybody's interested. Um at

16:06 ↗ our planning policy commission that

16:07 ↗ follows this, not with you guys. Um so

16:11 ↗ I'm just going to run through these

16:12 ↗ really quickly. Um we're doing we are

16:14 ↗ talking about reducing our outdoor

16:16 ↗ amenity space requirements. uh

16:18 ↗ revisiting our stepback requirements in

16:22 ↗ uh initiating a self-certification of

16:24 ↗ ADUs program revisiting our and right

16:27 ↗ sizing our floor area ratios some of

16:30 ↗ those aren't working. We are planning on

16:32 ↗ getting our statemandated parking

16:33 ↗ requirements about two done about two

16:35 ↗ years ahead of time. We are looking at

16:37 ↗ our natural context areas within central

16:39 ↗ Isiqua and the transparency

16:41 ↗ requirements.

16:42 ↗ Uh we're talking about allowing multif

16:44 ↗ family use in the urban village multif

16:47 ↗ family or you urban village commercial

16:49 ↗ and retail zones

16:52 ↗ providing flexibility to meet the intent

16:54 ↗ of design standards. Right now we're our

16:56 ↗ code says you must do all these things.

16:58 ↗ Uh we're looking more at a menu system

17:01 ↗ than what it is now. We're going to

17:03 ↗ revisit our variances and departures

17:06 ↗ through block connectors are tend to be

17:08 ↗ a little restrictive. Uh we need to

17:10 ↗ allow more flexibility there.

17:12 ↗ peer review. Right now, we require peer

17:14 ↗ reviews. We don't have all the staff

17:16 ↗ that we need in house with the

17:17 ↗ specialties that are required. And so,

17:20 ↗ we're looking at what really does have

17:22 ↗ to go through peer review. Can we do

17:24 ↗ more staff training and do that in-house

17:25 ↗ instead? We're going to look at ways to

17:28 ↗ mitigate redevelopment. Isqua's hard.

17:32 ↗ There are a lot of environmental

17:33 ↗ constraints in central Isiqua. There are

17:35 ↗ a lot of wetlands that are there that

17:36 ↗ have been paved over. There are streams

17:38 ↗ that are there that um are also built

17:42 ↗ right, you know, concrete running right

17:43 ↗ up next to them. But we want to improve

17:46 ↗ those things but still allow

17:48 ↗ development. So we're looking at that,

17:51 ↗ looking at more options to meet

17:53 ↗ sustainable development requirements.

17:55 ↗ Right now we require that if you're

17:56 ↗ 10,000 square feet or more, you have to

17:58 ↗ be platinum lead platinum. And the uh

18:02 ↗ climate action plan is being redone

18:04 ↗ right now. So they are talking about

18:06 ↗ options for this process.

18:09 ↗ We require structured retail parking

18:12 ↗ along we require we require retail uses

18:15 ↗ along structured parking on the

18:16 ↗ frontage. So we're looking at reducing

18:18 ↗ or eliminating that. We're looking at

18:21 ↗ incentives and

18:24 ↗ programs for affordable housing, multif

18:27 ↗ family tax exemptions, inclusionary

18:28 ↗ zoning and development bonus program. We

18:32 ↗ are going to try and rightsize our

18:33 ↗ impact fees which seem to be a little

18:35 ↗ big. And we're also looking potentially,

18:38 ↗ not me, I don't know how to do this, but

18:40 ↗ looking at AI potentially to help with

18:42 ↗ permitting in the city. Again, I noted

18:45 ↗ that we are working within central

18:46 ↗ Isiqua. Does anybody have any questions

18:48 ↗ before I move on? Doing a lot of

18:50 ↗ talking. No. Okay.

18:55 ↗ >> Just two so far, but we are planning to

18:57 ↗ do them, I believe, quarterly.

19:02 ↗ Pardon me.

19:06 ↗ >> They were they were Yes, they are the

19:09 ↗ groups have seen those.

19:10 ↗ >> Yes.

19:12 ↗ >> And they like them.

19:14 ↗ >> Okay.

19:18 ↗ >> So, we are working we are focusing

19:20 ↗ specifically on central Isiqua, which by

19:22 ↗ the way has five different neighborhoods

19:23 ↗ within it. And each one of these has

19:27 ↗ visions. These were the central Isiqua

19:29 ↗ plan was sort of revamped in 2016. There

19:33 ↗ was a moratorium. We re redid all the

19:35 ↗ visions, created new neighborhoods. Each

19:37 ↗ one has a vision. So the two that are in

19:39 ↗ central Isiqua are Gilman and Pickering.

19:41 ↗ Gilman is south of I90. And part of it

19:44 ↗ is it's a jewel of the city. It's

19:46 ↗ mixeduse transitoriented development,

19:48 ↗ diverse housing types, smaller street

19:50 ↗ grid system, great access to parks.

19:54 ↗ Pickering values diversity, opportunity.

19:57 ↗ It's got Costco as its corporate

19:58 ↗ headquarters. It's got convenient

20:00 ↗ connectedness to Isiqua Creek and to the

20:02 ↗ state park and it's a multifaceted

20:05 ↗ destination place.

20:07 ↗ So all of these that we're doing, we

20:09 ↗ want to make whatever development

20:11 ↗ happens work within these visions

20:14 ↗ and that that's okay. So next are

20:17 ↗ targets. I mentioned that we have jobs

20:18 ↗ and housing targets. Our targets for

20:21 ↗ 2044, between 2019 and 2044, we have to

20:25 ↗ plan for and accommodate 3,500

20:28 ↗ additional new units.

20:31 ↗ This year, King County started something

20:33 ↗ new and that they also added an area

20:35 ↗ meeting. They attached an area median

20:37 ↗ income to these. So

20:40 ↗ in theory, ideally in practice, but in

20:43 ↗ theory,

20:44 ↗ about over half of those have to be

20:48 ↗ below

20:49 ↗ 50% area median income, which is hard to

20:52 ↗ get, very hard to get. Only 600 363

20:56 ↗ would be market rate. So we also need to

21:00 ↗ consider that we know that we're not

21:01 ↗ going to get that number. I'm just

21:02 ↗ putting it out there. We know we're not

21:04 ↗ going to get it, but we need to try to

21:06 ↗ get pretty close to that.

21:09 ↗ So we actually have capacity for 11,000

21:12 ↗ about 11,000 units in central Isiqua and

21:15 ↗ our target's only 35. So clearly it's

21:17 ↗ out there. Um but here's the issue.

21:20 ↗ We've got these policies and visions we

21:22 ↗ know we need to work within. We have the

21:23 ↗ capacity, but how do we make it work in

21:26 ↗ the market? So I'm going to stop here

21:29 ↗ and uh see if you have any more

21:31 ↗ questions again and then I'm going to

21:32 ↗ hand it over to some of our developers

21:34 ↗ over here to talk. Any other questions

21:36 ↗ before I take a break?

21:40 ↗ No. Okay.

21:42 ↗ All right. Let me switch over.

21:44 ↗ >> Yes.

21:45 ↗ >> Do we need to use these or no?

21:46 ↗ >> Yes, please. We're on just a reminder,

21:48 ↗ we are on TV, so

21:49 ↗ >> Oh, okay. Um, and and I

21:54 ↗ hope I don't want to derail the

21:55 ↗ conversation, but I I do want to point

21:57 ↗ out on back on the AMI slide

22:00 ↗ >> for context, and most of you may know

22:03 ↗ this, but 30% of AMI is is permanent

22:07 ↗ supportive housing that requires a

22:10 ↗ significant amount of supportive

22:12 ↗ wraparound services to serve those

22:15 ↗ renters. And so when you say we need to

22:18 ↗ do our best to provide that, can you say

22:22 ↗ a little bit more about the city's

22:24 ↗ obligation there? Because I know we're

22:27 ↗ talking about market rate housing today

22:29 ↗ and obviously it's all in market rate

22:31 ↗ housing is connected to affordable

22:33 ↗ housing, especially when there's

22:34 ↗ programs that allow for those two

22:37 ↗ functions to coexist. But can you just

22:38 ↗ say a little bit more about that?

22:40 ↗ >> I I think a lot of that is really city

22:42 ↗ involvement. You all may know about the

22:43 ↗ trail head development that's happening

22:44 ↗ our our tod

22:46 ↗ that's been a process that's been

22:48 ↗ ongoing since 2017 and the city made a

22:52 ↗ deal with Century Link then Lumen and we

22:56 ↗ found them a another location to move.

22:58 ↗ We reszoned that property so that they

23:00 ↗ could locate there. They eventually

23:02 ↗ decided to go away but then there's a

23:04 ↗ cell tower. So the city said, "Hey,

23:05 ↗ we'll help you find a place to relocate

23:07 ↗ the cell tower because you can't build

23:08 ↗ on this property without it." So we

23:10 ↗ helped to move the the cell tower. A lot

23:12 ↗ of that is us working with Arch, working

23:15 ↗ with affordable housing developers,

23:17 ↗ working with market rate developers in

23:18 ↗ Kirkland in Belleview. There's a

23:20 ↗ development over there where two work

23:22 ↗ together on one site and you have an

23:23 ↗ affordable housing and you have market

23:25 ↗ rate housing. It's it's a lot of city

23:27 ↗ involvement and a lot of negotiation

23:29 ↗ that has to take place, but it can we've

23:32 ↗ it's been proven that it can be done.

23:34 ↗ >> Yeah.

23:49 ↗ Thank you, Kristen. Let's see. Does this

23:52 ↗ just press to the next?

23:56 ↗ >> Great. Um, I'm Carl Sheret, Avalon Bay

23:59 ↗ Communities. And then I have a few other

24:01 ↗ folks here with me who I'm just going to

24:03 ↗ have sit for now, but they'll feel free

24:04 ↗ to yell in if you guys have comments or

24:06 ↗ questions. Um Mark White, Trimble

24:09 ↗ Residential, Michael Chen, McKenzie,

24:11 ↗ maybe just to start just explain um our

24:14 ↗ relationship with city, what projects

24:15 ↗ we've worked on just to give a bit of

24:16 ↗ context and why we're here today. Again,

24:18 ↗ Carl Sharet, I'm working on the trail

24:20 ↗ head project as the market rate

24:22 ↗ developer that was just referenced.

24:23 ↗ We've also had a bit of an ill- fated

24:25 ↗ adventure trying to develop a property

24:27 ↗ about two blocks to the east. Uh

24:29 ↗ day-to-day multifamily development of

24:31 ↗ institutional size.

24:33 ↗ >> Mark, do you want to just step up here

24:35 ↗ so people know who you are? Sir, my name

24:36 ↗ is Mark Hoy with TM Residential and I'm

24:39 ↗ going to go next. So, I'll kind of give

24:40 ↗ a full introduction when I'm when I'm

24:42 ↗ up.

24:45 ↗ >> Good evening, commissioners, staff. Uh,

24:47 ↗ Michael Chen with McKenzie, associate

24:49 ↗ principal, uh, land use planner, been a

24:51 ↗ planner since I studied it in college,

24:53 ↗ so I'm practicing what I actually went

24:55 ↗ to school for. Um, been in the industry

24:58 ↗ for almost 30 years. Um, both on the

25:01 ↗ public and private side. uh projects in

25:04 ↗ Isiqua. I've done everything from

25:06 ↗ retail. Um the Fred Meyers, the Lazy Boy

25:09 ↗ here, the food bank is currently uh one

25:12 ↗ of our projects. We're working with uh

25:14 ↗ schemata. Um and then the Springs, which

25:17 ↗ is a 255 unit senior housing project up

25:21 ↗ at the Highlands. Um I commend all of

25:25 ↗ you for your service. I've been there um

25:27 ↗ eight years as a planning commissioner

25:29 ↗ for the city of Ron before I had to give

25:31 ↗ up my seat because I moved out. But um

25:33 ↗ yeah, I'll be speaking later about the

25:35 ↗ process and I work up and down the west

25:38 ↗ coast and other jurisdictions and trying

25:40 ↗ to, you know, get a broad perspective of

25:42 ↗ what other jurisdictions up and down the

25:44 ↗ West Coast are doing, what's working,

25:46 ↗ what's not. So that's it. Great.

25:49 ↗ >> Thank you. Um we're here really just to

25:51 ↗ serve as a resource for you all. I'll go

25:53 ↗ to the next page. Kristen had mentioned

25:55 ↗ um kind of the challenge of

25:58 ↗ accommodation versus delivering

26:00 ↗ apartments, right? You all have done a a

26:02 ↗ great job focusing on the vision and the

26:05 ↗ zoning and getting the city teed up to

26:07 ↗ allow development. What we're really now

26:09 ↗ focused on is how do we translate that

26:11 ↗ from accommodation to actual delivery?

26:14 ↗ How do we get new housing online in

26:16 ↗ Isiqua in the near future? Um I'm again

26:19 ↗ I'm specialized in housing, but Michael

26:21 ↗ certainly could talk about commercial as

26:22 ↗ well. I think here we wanted to give you

26:24 ↗ a bit of a development 101 on just what

26:26 ↗ we're seeing in the market today. How do

26:28 ↗ I evaluate properties? How do um

26:30 ↗ developers look at isiqua and what makes

26:32 ↗ us say yes or no? And more importantly,

26:34 ↗ what makes the capital that we require

26:36 ↗ to build these projects say yes or no.

26:39 ↗ Kristen was kind enough to point out

26:40 ↗ that this chart that I've shown um is a

26:43 ↗ little bit outdated. We're still waiting

26:44 ↗ for the the data from Washington's OFM

26:47 ↗ on the housing starts and deliveries for

26:49 ↗ the last year or two, but I think the

26:51 ↗ general premise remains the same. that

26:53 ↗ Isiqua has not seen the level of housing

26:55 ↗ development that I think um we all would

26:57 ↗ like to see and particularly that's

27:00 ↗ concentrated in central Isiqua. We've

27:01 ↗ not seen the vision come to life yet. So

27:04 ↗ again, we'd love to be a resource and

27:05 ↗ just do a little bit of what works, what

27:07 ↗ doesn't work. Feel free to jump in with

27:09 ↗ questions at any time, but we will do a

27:10 ↗ more formal Q&A at the end here as well.

27:14 ↗ I always like to start with for folks

27:15 ↗ that just housing and and development in

27:18 ↗ general takes a long time. Um Chris had

27:20 ↗ mentioned the trail head project that's

27:21 ↗ been almost 10 years in the making here.

27:24 ↗ I'd love to say that's an outlier, but

27:26 ↗ it's it is difficult to get projects set

27:28 ↗ up. Um it depends on the complexity,

27:32 ↗ timelines of the municipalities, the

27:33 ↗ availability of capital. But each one of

27:35 ↗ these um moments in time, these

27:38 ↗ milestones is a risk that the developer

27:40 ↗ is trying to solve. getting through the

27:42 ↗ purchase and sale agreement of piece of

27:43 ↗ land, getting through due diligence,

27:45 ↗ getting through the entitlements with

27:46 ↗ the city. All of this takes time and

27:49 ↗ that's where we really look to the

27:50 ↗ cities to be partners with us to try and

27:52 ↗ create efficiencies and condense this

27:55 ↗ timeline. Time for us equals risk, big

27:59 ↗ risk. Um, entitlements often take 6

28:03 ↗ months and can extend years. Typically,

28:05 ↗ we're spending hundreds of thousands if

28:07 ↗ not millions during that process out of

28:09 ↗ pocket. We generally don't have a lender

28:11 ↗ for that work. Um, and it's at risk,

28:13 ↗ right? If the project doesn't move

28:14 ↗ forward, there's no way to recoup those

28:15 ↗ costs.

28:17 ↗ We can employ uh numbers of consultants.

28:21 ↗ We have normally 20 consultants on any

28:24 ↗ project at least. We're working through

28:26 ↗ building permits. We're sourcing equity.

28:28 ↗ Um, all this process, the point is the

28:30 ↗ money goes out day one, but the returns

28:32 ↗ don't occur down the road. It's a highly

28:34 ↗ capital inensive business. This is no

28:36 ↗ longer the business where you call your

28:37 ↗ friends and say, "Hey, I want to build a

28:38 ↗ building." you got to go get a loan, you

28:40 ↗ got to go get an equity partner. Um, and

28:42 ↗ that's what a lot of we're really facing

28:44 ↗ today that has been difficult. So, as I

28:47 ↗ mentioned, capital is hard to find, but

28:49 ↗ it's also very selective and mobile. So,

28:52 ↗ it used to be again maybe local banks

28:54 ↗ were your lender and it was a very

28:55 ↗ regional type of business. Today, the

28:58 ↗ capital that is building the projects

29:00 ↗ that we would like to see built in isqua

29:02 ↗ and the rest of um the Seattle region

29:04 ↗ are institutional in nature and they're

29:07 ↗ large loans, right? We're talking hund00

29:09 ↗ million projects. You're normally

29:11 ↗ getting a loan for $60 70 million. Uh

29:14 ↗ and you need a partner. And increasingly

29:18 ↗ that money has been, as I said, mobile.

29:20 ↗ Lately, it's been going to the sunb

29:22 ↗ belt, right? Some of it's regulatory,

29:23 ↗ some of its demographic changes, but

29:25 ↗ we're fighting harder and harder for

29:27 ↗ every dollar that we try and secure for

29:29 ↗ housing development in this region. Not

29:30 ↗ just against ourselves. and Mark, you

29:32 ↗ know, him and I compete on projects, but

29:34 ↗ we're comp competing with our um our

29:36 ↗ partners on the East Coast, in the Sunb

29:38 ↗ Belt, everywhere else. And so capital is

29:40 ↗ a really important part of our business.

29:42 ↗ It cost us about $500,000 per apartment

29:45 ↗ to build a new apartment building in a

29:47 ↗ mid-rise scheme. You know, we're not

29:49 ↗ talking high-rise skyscrapers. Um we're

29:52 ↗ not talking single family homes. For a

29:53 ↗ standard apartment, it's about $500,000.

29:56 ↗ And given the timeline and the risks

29:58 ↗ that is mentioned, there's normally more

30:00 ↗ projects available than there is money

30:02 ↗ to fund those projects. So as much as I

30:05 ↗ may love my project or Mark may love his

30:06 ↗ project, I need to convince somebody

30:08 ↗ else to love that project as much as I

30:11 ↗ love that project, right? You need to

30:13 ↗ love your baby, need them to love your

30:14 ↗ baby as much as you do. And Seattle

30:17 ↗ sadly is not at the top of the list for

30:19 ↗ investors these days. Um, you know,

30:21 ↗ we've had our own share of state level

30:23 ↗ regulatory issues, the discussion of

30:25 ↗ rent control, taxes, all of that factor

30:27 ↗ in, but ultimately it's not as easy to

30:29 ↗ get a deal done anywhere in this region

30:31 ↗ as it used to be.

30:34 ↗ So, I think we sometimes gloss over the

30:37 ↗ concept of what is it a project does it

30:39 ↗ pencil or not, right? Like how do you

30:40 ↗ get a deal done? We always say we need

30:42 ↗ the project to pencil. And so, just

30:43 ↗ taking a quick step back on how the math

30:45 ↗ works from our perspective, we're

30:47 ↗ generally solving for a return on cost.

30:49 ↗ It's a math problem. We're trying to

30:51 ↗ make the returns be attractive enough to

30:53 ↗ attract that capital. We're looking at

30:56 ↗ something called net operating income.

30:58 ↗ So, kind of the money that's left over

31:00 ↗ after you pay all of your expenses on an

31:02 ↗ annual basis and dividing that by the

31:04 ↗ total amount of investment into a

31:05 ↗ project. That's the return on cost or a

31:07 ↗ yield that we're generally benchmarking

31:09 ↗ ourselves on. But more importantly is

31:12 ↗ that yield needs to be feasible. You

31:14 ↗ need to be able to demonstrate that

31:15 ↗ you're making a return that is

31:16 ↗ reflective of not only your own cost of

31:18 ↗ capital. How much are you borrowing?

31:20 ↗ What does it cost to borrow on that

31:21 ↗ money, but then what are you getting

31:23 ↗ compensated for? What is your capital

31:25 ↗ getting compensated for on the risk of

31:27 ↗ taking that long entitlements process of

31:29 ↗ building of not knowing where the rents

31:31 ↗ are going to go, not knowing if you're

31:33 ↗ going to have a war in the middle of

31:34 ↗ your uh development. You know, there's a

31:37 ↗ lot of variables. It's a long lag time.

31:39 ↗ And it takes us um you know, say we even

31:40 ↗ get shovels in the ground, it's

31:42 ↗ typically 24 to 36 months before we have

31:45 ↗ residents even moving in and paying

31:46 ↗ rent. And so there's a lot of exposure

31:48 ↗ to to markets during that period.

31:54 ↗ We're also seeing a bit of a tailwind or

31:57 ↗ a bit of a headwind after a long

31:59 ↗ tailwind of interest rates going down.

32:01 ↗ Many of you know last 40 years we've had

32:02 ↗ a a pretty strong bull run in interest

32:04 ↗ rates in bonds. Rates have gone down.

32:07 ↗ that has made capital more and more

32:08 ↗ accessible to us, cheaper and cheaper

32:10 ↗ for us to build new buildings and it's

32:12 ↗ generally bailed out broadb bad projects

32:15 ↗ and given a tailwind to projects that

32:17 ↗ maybe were on the cusp of getting done.

32:18 ↗ You normally would be able to find a way

32:20 ↗ to get it done. Everything's changed

32:22 ↗ since co and that's really I mean a

32:23 ↗ 40-year period of of the wind being at

32:25 ↗ your back now going into the wind on

32:27 ↗ your front. It's difficult for our

32:28 ↗ industry. Um, we're now facing rising

32:30 ↗ interest rates and those interest rates

32:32 ↗ are impacting not just again the the

32:35 ↗ loan that we take and the interest that

32:36 ↗ we pay on those loans, but what sort of

32:38 ↗ return expectations does our capital

32:40 ↗ have? It's benchmarked against these

32:41 ↗ interest rates. So, it costs more to get

32:43 ↗ the money, but we also have to deliver a

32:46 ↗ larger return all else equal.

32:49 ↗ We're generally solving for uh returns,

32:52 ↗ you know, 100 to 100 basis points above

32:55 ↗ um the premium above the rate at which

32:56 ↗ you could purchase buildings today. So

32:58 ↗ we need to again need to get compensated

32:59 ↗ for the risk relative to just going and

33:01 ↗ writing a check for something that

33:02 ↗ already exists. But it gets stacked on

33:04 ↗ top of that interest rate.

33:07 ↗ I tell people we would have done a deal

33:10 ↗ uh in this region somewhere around a 5%

33:12 ↗ return. So if we would have invested

33:14 ↗ $100, we probably would have made 5%

33:16 ↗ annually on that investment going

33:18 ↗ forward. We now need to target a return

33:20 ↗ that's about six and a quarter. So all

33:23 ↗ else equal, you know, ignoring the fact

33:25 ↗ tariffs, construction costs, inflation,

33:27 ↗ rents, rents would need to go up, all

33:29 ↗ else equal, 25% for me to do the deal

33:32 ↗ that I would have done 5 years ago

33:34 ↗ today. So that's a huge number to try

33:37 ↗ and beat before we even get into cost,

33:38 ↗ please.

33:46 ↗ >> Indefinitely. Yeah. And so

33:49 ↗ >> correct. And so that's how we we look to

33:51 ↗ get to a stabilized return of that. So

33:54 ↗ that's exactly right. Indefinite

33:59 ↗ >> uh our return on capital used to be a

34:02 ↗ target return used to be around a 5%.

34:04 ↗ We're trying to build a spread between

34:06 ↗ you know we would have been able to buy

34:07 ↗ a building for a 4% return. We can now

34:10 ↗ buy it um for 5% return. So that 100 bit

34:12 ↗ change. Um so we're we're looking now at

34:15 ↗ like a six and a quarter versus a five

34:17 ↗ previously.

34:20 ↗ Does that make sense?

34:22 ↗ >> Yeah.

34:26 ↗ >> Sorry, that does make sense. Great.

34:30 ↗ >> Just going back just one little step.

34:32 ↗ You had mentioned earlier that um sort

34:34 ↗ of the timelines.

34:36 ↗ >> Just for sort of context, what is the

34:39 ↗ the current timeline to get everything

34:41 ↗ from permitting from Isiqua versus let's

34:44 ↗ say another marketplace? And you could

34:46 ↗ just say hypothetically, let's say

34:47 ↗ Scottsdale or whatever you're working

34:48 ↗ at.

34:49 ↗ >> Yeah. I mean, I think regionally

34:51 ↗ Washington is tends to be complex and

34:53 ↗ the first rank suburbs of Seattle um all

34:56 ↗ tend to be reasonably complex. Isiqua

34:58 ↗ historically has been more complex. Um

35:02 ↗ every project is different. I'd hate to

35:04 ↗ say there's a magic number, but it would

35:06 ↗ probably take us

35:08 ↗ one to two years to get entitlements on

35:10 ↗ a deal in in here. uh probably towards

35:14 ↗ the the shorter end of that in other

35:15 ↗ municipalities locally. Everyone's

35:17 ↗ changing. Everyone's trying to get

35:18 ↗ better. Uh and some of it has to do just

35:20 ↗ with the quantity of the throughput,

35:22 ↗ right? Like there was really busy for a

35:24 ↗ while and everybody was all the

35:25 ↗ reviewers were, you know, they're

35:26 ↗ couldn't meet their timelines. Now it's

35:28 ↗ pretty quiet. Hopefully people can meet

35:30 ↗ their timelines a little bit easier, but

35:31 ↗ there's also less staff available to do

35:33 ↗ the reviews. So, it's always a balancing

35:35 ↗ act compared to Texas. I mean, you can

35:38 ↗ literally show up with a plane set in

35:39 ↗ Texas and get a permit within a month.

35:44 ↗ You have to live in Texas and they're

35:45 ↗ not complex buildings in the same way.

35:49 ↗ >> Yeah.

35:51 ↗ >> So, just going back to that

35:53 ↗ >> Sorry, I've got a I've got a question.

35:54 ↗ >> Oh, please.

35:55 ↗ >> How long uh is your average holding

35:57 ↗ period for properties?

35:59 ↗ >> Sure. So, we're a little bit different.

36:00 ↗ Mark and I have very different business

36:01 ↗ models. Um, Avalon Bay is a publicly

36:03 ↗ traded REIT, so we tend to hold

36:05 ↗ properties for 10 plus years. The

36:07 ↗ general internal guidance is 15 to 20.

36:10 ↗ Um, merchant developers tend to build it

36:12 ↗ and I won't speak for you, Mark, but you

36:15 ↗ generally, you know, want to sell as

36:16 ↗ quick as you can to an institutional

36:17 ↗ buyer like ourselves. So, we're a little

36:19 ↗ unique. I'd say Mark is probably more

36:21 ↗ typical of the market. Yeah, we I'd say

36:23 ↗ that we you know the

36:26 ↗ you know how we operate we we create the

36:28 ↗ business, stabilize the business and

36:31 ↗ then sell the business. That that's a

36:32 ↗ way to do it. There's other ways to do

36:34 ↗ it. We we certainly have had long-term

36:35 ↗ hold as well, but most of the capital

36:38 ↗ that's out there for the multif family

36:39 ↗ development world wants to create the

36:41 ↗ business, build the business, sell the

36:43 ↗ business. So,

36:45 ↗ >> thank you.

36:47 ↗ I I spoke about costs earlier and rents

36:49 ↗ and I think this is something that

36:50 ↗ oftentimes gets lost in the news. I

36:52 ↗ mean, we're all dealing with inflation

36:53 ↗ in our everyday life and it's no

36:55 ↗ different than uh what we see in our

36:57 ↗ business. Our costs, this is our own

36:59 ↗ internal numbers for a mid-rise um

37:02 ↗ apartment building from call it February

37:05 ↗ 2020, what we're calling pre-COVID,

37:07 ↗ although who knows what the world is um

37:09 ↗ to today is up about 44%. So, the cost

37:11 ↗ to build an apartment building is up

37:13 ↗ about 44% in this region. That's higher

37:16 ↗ than other regions. We we you know our

37:18 ↗ labor costs are higher, our material

37:19 ↗ costs are higher. Um million different

37:21 ↗ reasons for that. But our rents have

37:24 ↗ only gone up about 14%. And again, we've

37:26 ↗ seen rents go up and that's made the

37:28 ↗ headlines. I don't think the costs have

37:29 ↗ made the headlines in the same way. So

37:31 ↗ again, all else being equal, we would

37:33 ↗ have needed rents to go up 20% just to

37:35 ↗ make the deal make sense in today's

37:37 ↗ interest rate environment. We now have a

37:38 ↗ situation, well, nothing did stay the

37:40 ↗ same. Things changed. Costs went up,

37:42 ↗ rents went up less. So, we're fighting

37:44 ↗ not only uphill on the overall

37:46 ↗ macroeconomic climate, but locally the

37:48 ↗ market dynamics have shifted that have

37:50 ↗ made it really difficult for projects to

37:51 ↗ get done.

37:53 ↗ You all, ISQUA um have some other

37:56 ↗ specific challenges beyond just the

37:58 ↗ macro environment. It's it's a difficult

37:59 ↗ place to do business oftentimes not

38:01 ↗ through any fault of of the city. It is

38:03 ↗ just you know your geology and and your

38:05 ↗ location are challenging. High

38:07 ↗ groundwater table is kind of my first

38:09 ↗ when I talk to people. We can't build

38:11 ↗ parking below grade here in this in the

38:12 ↗ way that we can in Redmond. That has

38:15 ↗ million trickleon effects. We can't get

38:16 ↗ as many apartments on a single piece of

38:18 ↗ land as we would in other markets. It

38:20 ↗ challenges the way we lay out sites. It

38:23 ↗ makes it more expensive to build

38:24 ↗ foundations. All of that really is a

38:26 ↗ large contributor to the cost of doing

38:28 ↗ business in Isiqua. As um Kristen

38:31 ↗ mentioned, the the critical areas,

38:32 ↗ especially within the valley floor, are

38:34 ↗ very challenging. This this map shows um

38:36 ↗ some of the wetlands. there's others and

38:38 ↗ and there's streams and there's buffers

38:39 ↗ associated with each of these. So, it

38:41 ↗ limits the amount of land or the

38:43 ↗ viability of land relative to

38:45 ↗ maintaining its existing use. Uh it's

38:47 ↗ infill development. It's not green fill,

38:49 ↗ right? We're not going buying a farm and

38:50 ↗ building, you know, just stamping out

38:52 ↗ buildings. It's complicated. You have to

38:53 ↗ demo buildings. You have to work within

38:54 ↗ existing constraints. That makes the

38:56 ↗ land more expensive. We talked a little

38:58 ↗ bit about inclusionary housing here.

38:59 ↗ That's a cost that's born um everywhere

39:01 ↗ these days for the most part, but isqua

39:03 ↗ is, you know, has a has a part to play

39:05 ↗ in that. Title 18 code um very well

39:08 ↗ intended. It's really complex. The code

39:10 ↗ for central Isiqua is really complex to

39:12 ↗ the point where I don't think anybody

39:13 ↗ really knows oftentimes what they're

39:15 ↗ trying to accomplish. So code can be

39:18 ↗ good, it can be bad. Um I think we're

39:19 ↗ trying to find ways to make it clearer

39:21 ↗ and more flexible. Lack of a citywide

39:24 ↗ MFTTE program. MFTTE uh multifamily tax

39:27 ↗ exemption. So a lot of cities have

39:29 ↗ leveraged opportunities to develop

39:31 ↗ housing in exchange for affordable

39:33 ↗ housing or inclusionary housing in the

39:35 ↗ buildings. you get a tax break. That

39:36 ↗ doesn't occur here in Isiqua, at least

39:38 ↗ on a citywide basis. That's an area

39:40 ↗ that's a challenge for you all. And the

39:42 ↗ rents of Isiqua still remain slightly

39:44 ↗ lower than than pure cities. It's still

39:46 ↗ easier for me to go build a building in

39:48 ↗ Redmond. The rents are higher. The costs

39:51 ↗ are equivalent, if not even cheaper,

39:52 ↗ because of the the parking issue I

39:54 ↗ mentioned. Um same goes for Kirkland.

39:56 ↗ Same goes for Belle. You know, there's a

39:58 ↗ regional competition. The rents aren't

40:00 ↗ high enough to justify the level of

40:01 ↗ construction that um other cities might

40:03 ↗ see. Again, costs tend to stay the same.

40:06 ↗ I'm building the same building here

40:08 ↗ versus there. I'm going to choose the

40:10 ↗ one that that returns a higher return.

40:15 ↗ I just, you know, again, going back to

40:17 ↗ what happens if we don't do anything.

40:18 ↗ We're on this trajectory today.

40:20 ↗ Hopefully, this new normal I've circled,

40:22 ↗ um, you know, Kristen will update my

40:23 ↗ numbers for me and and we will be headed

40:25 ↗ in the right direction, but the general

40:26 ↗ economy is not heading in that

40:28 ↗ direction. So, we're trying to find what

40:30 ↗ can we do to reverse this this trend. Um

40:32 ↗ and without policy action by you all, I

40:34 ↗ don't think things will really change

40:36 ↗ here. It's difficult enough for us to do

40:37 ↗ business in Redmond and elsewhere

40:39 ↗ because of all the things I just spoke

40:40 ↗ about. Isiqua um has those other

40:42 ↗ challenges that make it even harder to

40:43 ↗ do business here and justify the the

40:45 ↗ risk return that I that I spoke about

40:47 ↗ previously.

40:50 ↗ Um and really what happens is a lack of

40:53 ↗ supply and and lack of supply, I mean

40:55 ↗ research will show that lack of supply

40:58 ↗ is the greatest contributor to rent

41:00 ↗ growth. So while your rents may be

41:02 ↗ relatively low to your pure cities

41:04 ↗ today, they will continue to outpace the

41:06 ↗ region if no new supply is provided. And

41:09 ↗ research also shows that it particularly

41:11 ↗ uh impacts the class B and class C

41:13 ↗ properties that we would typically think

41:15 ↗ of as more naturally affordable. So

41:17 ↗ building new supply, while it may um

41:21 ↗ increase the rents of that that new

41:22 ↗ construction, right, I'm building

41:23 ↗ projects that will be expensive. That's

41:25 ↗ the reality of new housing. But it it

41:27 ↗ creates a relief valve for the

41:28 ↗ properties that are slightly lower

41:30 ↗ priced. And if that relief valve isn't

41:32 ↗ there, those prices continue to go up.

41:36 ↗ So I developer had mentioned, I think

41:38 ↗ this is um increasingly

41:41 ↗ the the the center of our discussion

41:42 ↗ with cities lately is that the goal of

41:44 ↗ additional housing supply if if the goal

41:46 ↗ is additional housing supply that

41:48 ↗ feasibility needs to be treated as a

41:49 ↗ policy objective rather than a market or

41:52 ↗ developer failure. We I would love to do

41:55 ↗ business in Isiqua. There will be places

41:57 ↗ for me to do business without the re

41:59 ↗ throughout the region. Um I would like

42:02 ↗ to do business in Isiqua because I love

42:03 ↗ the city and there's great um reasons to

42:05 ↗ be here. But sometimes the city needs to

42:08 ↗ play a part in that or the counselors

42:10 ↗ need to play a part in that in helping

42:12 ↗ create feasibility of projects that

42:14 ↗ don't otherwise make sense. the cities

42:16 ↗ that are leaning in and finding ways to

42:18 ↗ work with developers are the ones who

42:20 ↗ are going to benefit from this

42:21 ↗ constrained capital environment to get

42:23 ↗ new um housing built. Sure. Is it Chris?

42:25 ↗ Chris,

42:26 ↗ >> can you go back onto the what you were

42:28 ↗ saying about the peer cities and the

42:29 ↗ rent?

42:30 ↗ >> Yeah.

42:30 ↗ >> Because when you look at it, when I

42:32 ↗ think about from a business perspective,

42:36 ↗ >> I mean, I manage a I manage a branch.

42:38 ↗ Only one of my employees lives out of

42:40 ↗ four in Isiqua. So if that if you're

42:42 ↗ what you're saying is our compared to

42:44 ↗ our peer cities if I heard you right to

42:45 ↗ clarify you're saying is rents are lower

42:48 ↗ than our peer cities. Do you have that

42:50 ↗ exact number of how much lower? Because

42:52 ↗ I don't see that honestly as a business.

42:54 ↗ >> Yeah I think it depends on where you're

42:56 ↗ looking. I mean we tend to operate in

42:58 ↗ the the newer construction um more

43:00 ↗ modern product more modern apartments

43:03 ↗ those will trade at a discount to a

43:06 ↗ newer building in Redmond for example.

43:08 ↗ When I say peer cities, and maybe it

43:09 ↗ depends on who you compare yourself as a

43:11 ↗ peer to when I think of Kirkland and

43:13 ↗ when I think of Redmond and the places

43:14 ↗ we're doing business,

43:16 ↗ Isiqua would trade at a slight discount.

43:18 ↗ I would underwrite slightly lower rents,

43:20 ↗ not meaningfully, not, you know, not 10

43:22 ↗ 20%, but a slight discount, which makes

43:24 ↗ all the difference when you talk to

43:25 ↗ capital. But you're right, um, at the

43:27 ↗ lower end, I think there's more

43:28 ↗ variability. Part of the challenge of of

43:30 ↗ Isiqua is there's not the diversity of

43:32 ↗ housing stock that you see in other

43:33 ↗ cities, right? the class B and class C

43:36 ↗ and class A minus and you know the the

43:38 ↗ ADUs whatever it is there's more options

43:41 ↗ outside of Isiqua. So that's part of it

43:42 ↗ too is that we're trying to increase the

43:44 ↗ diversity of the housing not just the

43:46 ↗ quantity

43:49 ↗ >> and that's where I was wanting you to go

43:50 ↗ with that.

43:51 ↗ >> Yeah, we're on board with that. I can't

43:53 ↗ disagree.

43:57 ↗ Um

43:59 ↗ we mentioned that the cities can't

44:00 ↗ control everything, right? Interest

44:02 ↗ rates are out of your hands.

44:03 ↗ construction, labor, capital

44:04 ↗ requirements, rents. That's not

44:07 ↗ something that we're looking for for the

44:09 ↗ cities to solve. But there are

44:11 ↗ opportunities for the cities to work on

44:13 ↗ on items like development timelines,

44:16 ↗ parking and building requirements,

44:17 ↗ density efficiencies, fees, risk

44:20 ↗ exposure, all these things that really

44:21 ↗ make up this policy work plan that um

44:24 ↗ has been, you know, hats off to the city

44:26 ↗ for for trying to to work with

44:28 ↗ developers and figure out what is the

44:30 ↗ most cost-effective way to get new

44:32 ↗ housing developed. I would add though

44:34 ↗ looking at this list, a lot of the items

44:36 ↗ that are on the near-term, they're the

44:38 ↗ easy wins. They're the little things

44:39 ↗ that help and it's good to have those,

44:41 ↗ right? Some of it's just showing the

44:43 ↗ intent that we want to help, but the

44:45 ↗ real meaty things that are going to move

44:46 ↗ the needle. You know, I the the step

44:48 ↗ back requirements and the amenity space

44:50 ↗ requirements, that's great, but that's

44:52 ↗ not going to solve a 20% rent gap,

44:54 ↗ right? When we get into things like

44:55 ↗ redevelopment within buffers and how the

44:57 ↗ critical areas work, when we get into

44:59 ↗ inclusionary zoning or impact fees,

45:01 ↗ those are the things that really move

45:02 ↗ the needle and those are a little bit

45:04 ↗ further out. So, um, we're hopeful that

45:06 ↗ that we'll find a way to move forward

45:08 ↗ there, but it is a lot of work still to

45:10 ↗ come.

45:14 ↗ I would also add, uh, I think the the

45:17 ↗ intent and investor perception, as

45:20 ↗ Christian Kristen alluded to, is is

45:22 ↗ really important, right? Like there has

45:23 ↗ been a perception locally that it's

45:25 ↗ difficult to do business in Isiqua. And

45:27 ↗ when you have capital that's struggling

45:29 ↗ to um figure out where to focus and

45:32 ↗ they're being dragged in a million

45:33 ↗ different directions because everybody's

45:35 ↗ got a project and everybody's saying

45:36 ↗ this is the greatest thing in the world.

45:38 ↗ It's easy to say no to a project when

45:40 ↗ the reputation is oh well it's just

45:42 ↗ going to get stuck in litigation or it's

45:44 ↗ going to get drugged out. Um you know

45:46 ↗ the the cities can play a great partner

45:48 ↗ in saying look we want development here.

45:50 ↗ We want thoughtful responsible

45:51 ↗ development. We want, you know, what we

45:53 ↗ want, but we want to be a partner to you

45:55 ↗ all and find a way to a solution that

45:57 ↗ goes a long ways um with changing

45:59 ↗ investor perception and allowing us to

46:01 ↗ find the capital that we need to build

46:03 ↗ these projects.

46:05 ↗ Is there one or two items on that list

46:07 ↗ that you would say

46:10 ↗ uh if the city were to focus on one of

46:11 ↗ those two items that would make it more

46:13 ↗ palatable for you know suppose of the

46:15 ↗ timeline we've got existing I'm not

46:17 ↗ going to speak on your but just hey if

46:19 ↗ we had a magic wand we'd say these two

46:21 ↗ would be the most important ones to move

46:22 ↗ up on the list as far as timing wise.

46:25 ↗ >> Yeah I tried to put some fun little

46:26 ↗ dollar signs here that that I thought

46:28 ↗ were my perspective on it. I think

46:30 ↗ everybody will have a different

46:31 ↗ perspective, but Isiqua is so challenged

46:34 ↗ by critical area buffers. It is such a

46:36 ↗ unique function of the city. Um,

46:40 ↗ and when I'm talking about buffers, I'm

46:41 ↗ talking about parking lots, right? I

46:42 ↗ think of the Hobby Lobby site where

46:45 ↗ that's a major potential development

46:47 ↗ site in a great location, but we can't

46:48 ↗ touch it because there's too many

46:50 ↗ buffers that come off of those streams

46:51 ↗ that would make it you would have to

46:54 ↗ pull yourself back from that stream

46:55 ↗ beyond even the extents of where the

46:57 ↗ parking is today. that it's just going

46:59 ↗ to sit as a parking lot for indefinitely

47:01 ↗ until policy is changed. I know that

47:03 ↗ that the state has some um there's kind

47:06 ↗ of a tension between city and state

47:07 ↗ regulations and that's not an easy

47:09 ↗ solution, but other cities are dealing

47:11 ↗ with that. Kirkland's having the same

47:12 ↗ discussion of how do you you know infill

47:14 ↗ development is hard when you're also

47:16 ↗ trying to manage the and and navigate

47:17 ↗ these these buffers. Uh and then

47:19 ↗ inclusionary zoning, inclusionary

47:21 ↗ housing is a huge tax on new housing. I

47:23 ↗ think, you know, there's certainly an

47:24 ↗ argument for it, but having it be well-c

47:26 ↗ calibrated, having an incentive, making

47:28 ↗ it a funded inclusionary program um with

47:31 ↗ a well-calibrated MFT program makes a

47:33 ↗ big difference to our to our

47:34 ↗ underwriting.

47:39 ↗ Yeah. Hi, Kelly.

47:42 ↗ Thank you. So, when I look at Isiqua, I

47:46 ↗ see basically like a sea of surface

47:48 ↗ parking mostly in one and twotory

47:50 ↗ buildings. And you know, not only do we

47:53 ↗ need more multifamily affordable

47:56 ↗ housing, but we also need uh more

47:58 ↗ commercial space. I hear that quite a

48:00 ↗ bit with everything that I do. Um and so

48:03 ↗ do you and do you foresee these factors

48:06 ↗ affecting commercial space as well?

48:09 ↗ >> Yeah, absolutely. I mean, it's that I'm

48:10 ↗ speaking through the lens of a a housing

48:12 ↗ developer, but it it applies the same to

48:14 ↗ anything redevelopment of these infill

48:16 ↗ sites. Um cities are going to have to

48:18 ↗ grapple with what the right way forward

48:20 ↗ is here. Our perspective is that, you

48:23 ↗ know, improving a uh a surface parking

48:27 ↗ lot that has direct runoff into streams

48:30 ↗ is more important than maintaining the

48:33 ↗ buffers that are set out um or finding

48:35 ↗ some balance in between. But the same

48:38 ↗ argument would apply for commercial

48:39 ↗ development, right? We can't we can't

48:40 ↗ justify the purchase price of an

48:42 ↗ existing building with a large shopping

48:44 ↗ with a large um with a large parking lot

48:47 ↗ if there's not an incentive to redevelop

48:49 ↗ that site. So, I know that's a sticky

48:51 ↗ subject and I don't want to derail the

48:53 ↗ conversation because there's many

48:54 ↗ pieces, but I I absolutely think it

48:55 ↗ applies the same to to housing and to

48:57 ↗ commercial.

49:00 ↗ I threw a development case up here, case

49:02 ↗ study up here just for you all to

49:03 ↗ understand, you know, the math behind

49:05 ↗ it. Um, and I think this will be in was

49:07 ↗ this going to be be passed out to folks

49:08 ↗ later or there'll be a digital version.

49:12 ↗ >> Okay. So, if you if you're curious just

49:13 ↗ on how we look at things, um this is

49:15 ↗ just a generic there's no specific deal,

49:17 ↗ but when I'm underwriting a normal deal

49:19 ↗ in the Northwest right now, I'm

49:21 ↗ underwriting and getting to a yield as I

49:23 ↗ mentioned that that return of about

49:25 ↗ five, you know, low 5% call it and a

49:27 ↗ target return of of a low six. That's

49:30 ↗ with some pretty reasonable rents. I

49:32 ↗ mean, you look at this in a $2,600

49:35 ↗ one-bedroom, I don't think anybody is

49:36 ↗ going to say you're you're being cheap.

49:38 ↗ um we need those rents in order to get

49:40 ↗ close to the returns, but we're still

49:42 ↗ not getting there. Some of that is the

49:44 ↗ affordable housing that that drags the

49:45 ↗ co that drags the revenues down, but

49:48 ↗ it's um the math doesn't work for very

49:50 ↗ creative sites at the moment. The

49:52 ↗ fundamental model is broken. Costs and

49:55 ↗ and incomes I included in here just so

49:56 ↗ you all know, you know, where's the

49:58 ↗ money go, right? It's not uh it's not a

49:59 ↗ black box. The money gets spent on

50:02 ↗ various things. I mean, structures are

50:03 ↗ obviously a big piece of it. Land is is

50:05 ↗ a relatively small piece of it. We tend

50:07 ↗ to think of, you know, land will just

50:09 ↗ adjust. You could write the land almost

50:11 ↗ down to zero in this scenario and this

50:12 ↗ project still barely makes sense, right?

50:14 ↗ Land is it's not a rounding error, but

50:17 ↗ the construction costs, the hard costs

50:18 ↗ themselves, and the rents are

50:20 ↗ meaningfully more important. And Avalon

50:23 ↗ Bay is a big company, right? I get the

50:24 ↗ best terms. I can borrow at the best

50:26 ↗ rates. Like, if any if it should work

50:28 ↗ for anybody, it should work for me, and

50:29 ↗ it doesn't work for me.

50:32 ↗ I'll let Mark talk because he's the one

50:34 ↗ who seems to find a way to make all

50:35 ↗ these things work. Um, so maybe he has

50:38 ↗ the secret.

50:42 ↗ >> Go ahead, Mark.

50:42 ↗ >> Yeah, thanks. Hi, everybody. Um, my name

50:45 ↗ is Mark Hoy. So, I'm the managing

50:48 ↗ partner for Trammor Residential. So,

50:49 ↗ we're an apartment developer nationwide.

50:51 ↗ I run the region here in the Northwest.

50:54 ↗ Um, you know, I have this map on the

50:56 ↗ screen that shows we're primarily

50:59 ↗ focused on suburban development, right?

51:01 ↗ This is this is our portfolio over the

51:03 ↗ last decade or so. We're building in,

51:06 ↗ you know, Shoreline and both and Lynwood

51:08 ↗ and Woodenville and Redmond, Belleview,

51:11 ↗ um, etc. And we built one project in

51:14 ↗ Isiziqua, which is I I'll have a little

51:16 ↗ case study of of how that deal came

51:18 ↗ together and explain what we built

51:20 ↗ there. I think you'll probably know that

51:21 ↗ deal, but more importantly, I'm I'm here

51:24 ↗ partly as a community member as well. I

51:26 ↗ live in Samish Plateau, just on the east

51:28 ↗ side of kind of near East Lake High

51:30 ↗ School. So, you know, tonight I skipped

51:33 ↗ my daughter's nine-year-old daughter's

51:35 ↗ softball game to be here, and I learned

51:37 ↗ when I pulled up that all of the gears

51:38 ↗ in my truck.

51:40 ↗ >> So, so my um so my daughter's wearing

51:43 ↗ the other team's catching gear,

51:45 ↗ apparently. So, that was my fault. I

51:47 ↗ forgot to drop it off. But, you know, we

51:49 ↗ we're very in the local community,

51:51 ↗ little league coaching and the Cub

51:53 ↗ Scouts and etc, etc. So, my mom was at

51:56 ↗ Providence Point, right? So, we're very

51:58 ↗ we're very invested in the in the local

52:00 ↗ community.

52:02 ↗ >> Yeah, that's right. Um, so the next

52:06 ↗ slide here. So, this is the location.

52:08 ↗ So, we're we're one of only two we built

52:11 ↗ one of only two developments that was a

52:13 ↗ podium in Isiziqua. So, a po I guess I

52:16 ↗ should stop there. A podium is

52:19 ↗ concrete for a level or two or three

52:22 ↗ with wood framing above it. Right. So

52:24 ↗ that's it's a higher density type of

52:27 ↗ product is is your trailside a podium

52:29 ↗ deal. Yeah. So so that gives the density

52:32 ↗ that is really required to to build

52:35 ↗ multifamily housing. And I think it's

52:37 ↗ important to note that you know Carl

52:39 ↗ kind of touched on it but you know our

52:41 ↗ industry the multifamily development

52:43 ↗ world we don't build million-dollar

52:45 ↗ condos and $2 million single family

52:47 ↗ homes. We're building product for the

52:49 ↗ middle income people, right? Anywhere

52:51 ↗ from 80% to 120% of AMI is generally our

52:56 ↗ customer. So we're building housing that

52:58 ↗ teachers live in, that the police and

53:00 ↗ firefighters live in, etc. So we don't

53:02 ↗ build ultra fancy. I I will say we build

53:04 ↗ for the masses, not for the classes,

53:06 ↗ right? We build kind of right in the

53:08 ↗ middle where there's demand, where

53:09 ↗ people really need housing. And um we

53:12 ↗ really focus on that because that's

53:14 ↗ partly because where it's needed. Um and

53:17 ↗ and that's that's where generally the

53:19 ↗ capital wants to invest as well. So this

53:21 ↗ project is in the Isiqua Highlands. So

53:24 ↗ it's just behind like the HomeGoods and

53:26 ↗ Dex Sporting Good. And I was just going

53:28 ↗ to walk you through this development. So

53:31 ↗ only two of these podiums have been

53:32 ↗ developed in Isiqua. One is kind of

53:34 ↗ behind the REI. It's called Veil. Is

53:37 ↗ that right? Okay. So Veil and and this

53:40 ↗ one. So we spend a lot of time to build

53:43 ↗ good communities, right? We we take a

53:45 ↗ lot of pride in what we do. We want to

53:47 ↗ make sure it's a nice place to live. Um,

53:51 ↗ you know, this property in particular

53:52 ↗ had a lot of people that would live

53:54 ↗ there for a year or two, then try to go

53:55 ↗ buy a house, right? Um, so it's it's

53:58 ↗ it's a it's a nice community. We want to

54:01 ↗ build nice product. This one was unique.

54:03 ↗ Um, you can kind of see the the photos

54:06 ↗ here. This is the the interior of it. We

54:08 ↗ want to build nice finished out units.

54:11 ↗ On the top right, we have bike rooms and

54:14 ↗ we call it a bike kitchen, right? So,

54:16 ↗ repair your bike in the in the inside

54:18 ↗ the building, but very livable, nice

54:20 ↗ fitness centers, uh nice community

54:22 ↗ spaces, co-working, etc. We want to make

54:26 ↗ it a a community and an extension of

54:28 ↗ your of your actual housing unit.

54:33 ↗ Um Carl hit on a lot of this, but I I

54:35 ↗ just he just wanted to go through some

54:37 ↗ of these details. So, and and by the

54:38 ↗ way, please if you have any questions,

54:41 ↗ I'm happy to answer them. Um, so in

54:45 ↗ general, two to three years of work

54:49 ↗ before we can start construction and

54:52 ↗ four to $6 million of of cash out of

54:54 ↗ pocket before we can start construction.

54:56 ↗ So, before construction starts, all of

54:59 ↗ that money is at significant risk,

55:01 ↗ right? Okay. So, if the deal doesn't

55:02 ↗ come together and you can't and you

55:04 ↗ don't have a lender or you don't have an

55:05 ↗ equity investor at the table to um to

55:09 ↗ invest in your project going vertical,

55:11 ↗ that money is completely at risk and

55:13 ↗ often times lost, which is a big hit to

55:15 ↗ the business obviously. Um so, we need

55:19 ↗ to attract the construction lender 55 to

55:21 ↗ 65%, maybe get to 70, but we like to

55:24 ↗ stay somewhat low leverage. And then we

55:26 ↗ need to attract an equity investor um to

55:29 ↗ contribute 85 to 95% of the of the

55:32 ↗ equity. So, you know, Carl's firm is a

55:35 ↗ little bit different than mine. He's a

55:36 ↗ public public company. Usually has

55:38 ↗ internal money. May have some other

55:40 ↗ investors.

55:41 ↗ >> Still got to ask for it.

55:42 ↗ >> You still got to ask for it.

55:43 ↗ >> Yeah. Yeah. I'm not saying it's easy.

55:44 ↗ I'm not saying it's easy, but you know,

55:46 ↗ our our business is we we always have to

55:49 ↗ bring in a a third-party limited partner

55:52 ↗ equity investor. So, you know, Carl kind

55:55 ↗ of hit on it where, you know, Seattle

55:58 ↗ metro, I'd say the whole West Coast has

56:00 ↗ in general fallen out of favor with the

56:03 ↗ institutional equity investors. And

56:05 ↗ that's a combination of all the things.

56:07 ↗ It's complicated. It's hard to build. Um

56:10 ↗ the costs are very high. The land is

56:12 ↗ expensive.

56:14 ↗ um the regulatory environment, you know,

56:16 ↗ some investors just stopped showing up

56:19 ↗ because the rent control pass and

56:20 ↗ they're just like, we don't want to

56:21 ↗ invest in a in a state that has that,

56:23 ↗ right? So, there's a lot of headwinds to

56:25 ↗ actually attracting capital and the

56:28 ↗ capital is global, right? I mean, it's

56:31 ↗ not like it's it's going to invest in

56:32 ↗ San Francisco or Seattle. It's going to

56:35 ↗ invest in Indonesia or the US, right? So

56:38 ↗ when when there is capital available for

56:40 ↗ multifamily development, it's it's it's

56:43 ↗ oftent times not as attractive in on the

56:45 ↗ West Coast as it is in Florida or Texas

56:48 ↗ or or etc where it's a little bit easier

56:51 ↗ to build and the regulatory environment

56:52 ↗ is a little bit less complicated. Um and

56:56 ↗ I think the big one there is there needs

56:57 ↗ to be a proven business plan. There

57:00 ↗ needs to be there needs to be some kind

57:02 ↗ of profit, right? Because if there's no

57:04 ↗ profit, there's you can't attract

57:05 ↗ investment. Um so this this is actually

57:10 ↗ the on the left side here this is the

57:12 ↗ actual Hartwood project in the isqua

57:14 ↗ highlands. So the actual construction

57:16 ↗ cost we started construction in 2019

57:19 ↗ um and and the total project cost $68.5

57:22 ↗ million.

57:24 ↗ So this is when we had about a 55% um

57:28 ↗ construction loan. We had a J it's

57:30 ↗ actually a Japanese equity investor um

57:33 ↗ put put the money into the deal and then

57:35 ↗ we contributed our share of it. I

57:37 ↗ believe it was 9010 on the total project

57:39 ↗ cost um from our from our organization.

57:43 ↗ Um and that deal worked at the time. Um

57:46 ↗ on the right side here I just we just

57:47 ↗ did some simple math. I talked to my

57:49 ↗ precon team to price this out and we

57:52 ↗ just said listen what what would this

57:53 ↗ cost today? And the answer is about $87

57:57 ↗ million. Right? So you can see there is,

58:00 ↗ you know, there's an assumption there.

58:01 ↗ The land value went from 5 a.5 million

58:03 ↗ to 8.5 million. And land is is tricky,

58:07 ↗ right? Because a lot of these land

58:09 ↗ owners in Isiqua have owned the land for

58:11 ↗ a long time. These part these big

58:13 ↗ shopping centers with giant parking

58:14 ↗ lots, somebody might have owned that

58:16 ↗ land for 10, 15, 20, 30 years. And in

58:19 ↗ 2019 or 2020 or 2021, the land value was

58:23 ↗ $8 million. Well, today it's maybe four

58:27 ↗ or three or two. They just don't sell,

58:31 ↗ right? They just don't sell. So that you

58:33 ↗ can't force a land seller to to sell the

58:35 ↗ sell the land to you obviously and they

58:37 ↗ just refuse to sell. So that it's a

58:39 ↗ sticky price. So when when asset

58:41 ↗ valuations come down, land doesn't

58:44 ↗ always go with it. Land just kind of

58:45 ↗ stays because the sellers aren't

58:47 ↗ incentivized to sell. They'll just hold

58:48 ↗ it indefinitely or for another 10 years

58:50 ↗ or the next cycle or whatever.

58:53 ↗ So land value is just up from 5.5 to

58:57 ↗ 8.5. Financing costs are huge. I mean it

59:00 ↗ went from 1.7 to $3.5 million. So the

59:03 ↗ our underwriting our interest rate in on

59:06 ↗ the Hartwood project was about three and

59:08 ↗ a half% allin. Well, now it's six and a

59:12 ↗ half, right? So So that adds another

59:15 ↗ million and a half almost $2 million of

59:17 ↗ additional cost to the development.

59:20 ↗ Um, construction costs are up

59:23 ↗ significantly, but our construction

59:24 ↗ costs here were $50 million, we think,

59:28 ↗ per square foot, $362 per square foot.

59:31 ↗ Today, we think that same hard cost

59:33 ↗ would be $451 per square foot. So, goes

59:36 ↗ from $50 to $62 million. So, the the the

59:39 ↗ costs are always ramping up. Soft costs,

59:43 ↗ you know, all the architects live

59:45 ↗ locally, the civil engineers live

59:47 ↗ locally. um they their co all their

59:49 ↗ employees cost of living is going up.

59:51 ↗ They have to pay their employees more.

59:53 ↗ So all those costs are always inching

59:55 ↗ up. So today that that project would

59:57 ↗ cost we think $87 million to build.

1:00:01 ↗ Yeah, please.

1:00:03 ↗ >> So I look just rough math. So your per

1:00:06 ↗ unit is up 30%.

1:00:08 ↗ >> Yeah.

1:00:09 ↗ >> So what would the rent need to be?

1:00:11 ↗ Because I'm not sure what the rent is on

1:00:12 ↗ the current project. Would this just be

1:00:14 ↗ not even doable because you're already

1:00:16 ↗ pushing your return on

1:00:19 ↗ >> on that? Like I guess the first question

1:00:21 ↗ is what's the current

1:00:23 ↗ >> yield that you have right now on and

1:00:26 ↗ then what would it be in this based on

1:00:28 ↗ the current rent and then what would the

1:00:29 ↗ rent have to be to get to that same?

1:00:30 ↗ >> It's a great question. I don't have the

1:00:32 ↗ exact answer. Um but the the yield on

1:00:36 ↗ this $68.5 million was roughly a five

1:00:39 ↗ and a half. The yield on I I did not run

1:00:42 ↗ that math, but the yield on the 87 is

1:00:45 ↗ probably a five, but Carl made the point

1:00:47 ↗ earlier, which is on the on point, which

1:00:49 ↗ is the yield requirements in 2019 were

1:00:53 ↗ five and a half. The yield requirements

1:00:55 ↗ today are six and a half, six and a

1:00:58 ↗ quarter maybe, right? So the ye so the

1:01:00 ↗ yield's upside down. The costs are up

1:01:03 ↗ and the yield requirements are up, but

1:01:04 ↗ the yield is actually down. So the rents

1:01:07 ↗ would have to be 30% higher than they

1:01:10 ↗ are today probably to really make it

1:01:12 ↗ work.

1:01:16 ↗ >> Yeah. So you would you would never be

1:01:18 ↗ able to convince somebody. Now Isiziqua

1:01:20 ↗ is unique. Now investors are very

1:01:22 ↗ interested in investing is in Isiqua if

1:01:24 ↗ you can get a project through the

1:01:26 ↗ process and that's that's a big

1:01:29 ↗ challenge that we're we're here to kind

1:01:30 ↗ of talk about and help on. Um so could

1:01:33 ↗ we finance the deal at $87.6 $6 million

1:01:37 ↗ maybe, but we probably wouldn't spend

1:01:40 ↗ the5 or $6 million for two or three

1:01:43 ↗ years now.

1:01:45 ↗ Starting right now, we wouldn't spend

1:01:46 ↗ the $3 million or $4 million to to get

1:01:48 ↗ to entitlement without that other equity

1:01:50 ↗ investor in tow. And that other equity

1:01:52 ↗ investor is likely not there unless it's

1:01:54 ↗ a six and a quarter. And there's there's

1:01:56 ↗ no way it's going to be a six and a

1:01:57 ↗ quarter on the $87 million.

1:02:00 ↗ So that's the that's the problem, right?

1:02:02 ↗ I think the flip side of this too is the

1:02:04 ↗ asset valuations are down, right? Um, so

1:02:07 ↗ you know, Carl alluded to it, but yield

1:02:10 ↗ on cost is a direct relationship to

1:02:12 ↗ what's called a cap rate. So

1:02:14 ↗ capitalization rate. So an investor and

1:02:17 ↗ you know, we we actually sold the

1:02:19 ↗ building in 2021. So an investor would

1:02:21 ↗ pay, you know, back in when we started

1:02:23 ↗ construction in 2019, the market was

1:02:26 ↗ okay, the exit cap rate is approximately

1:02:29 ↗ 4%. So we're building for five and a

1:02:31 ↗ half yield. So there's a 1 and a.5%

1:02:34 ↗ spread over the cost to build that that

1:02:36 ↗ compensates us and the investors for

1:02:39 ↗ that risk. Um the cap rates today four

1:02:44 ↗ and a half to five. You probably only

1:02:46 ↗ bank on a five. The underwriting is

1:02:48 ↗ generally 4.75 on an exit in five years.

1:02:52 ↗ Um so you you still need that point and

1:02:54 ↗ a half spread. So that's where you get

1:02:55 ↗ to the six and a quarter six and a half

1:02:56 ↗ yield. And those are just humongous

1:02:58 ↗ swings. those those percentages sound

1:03:00 ↗ small, but they're 30 40 $50 million

1:03:03 ↗ swings um in in total projects. So,

1:03:08 ↗ that is

1:03:10 ↗ the end of my presentation. I'm hopeful

1:03:12 ↗ you guys can I'm happy to I came for two

1:03:14 ↗ reasons, to learn and to educate. So, I

1:03:16 ↗ love to love to answer any questions or

1:03:18 ↗ learn more. Yeah,

1:03:19 ↗ >> just a quick question. Um how many units

1:03:21 ↗ is this for the Hartwood?

1:03:22 ↗ >> This is 135 units.

1:03:24 ↗ >> Thanks.

1:03:25 ↗ >> Yeah. And this was unique. This was in

1:03:27 ↗ the in the Isiqua Highlands. So, this

1:03:30 ↗ was I believe this was inside the Isiqua

1:03:32 ↗ Highlands. This was the only remaining

1:03:34 ↗ piece of land that would that could be

1:03:36 ↗ rental housing.

1:03:39 ↗ Yeah. Yeah. Thanks. It's we we spent a

1:03:41 ↗ lot of time to get it right and it

1:03:43 ↗ turned out well for us. We'd love to

1:03:45 ↗ build more in Isqua. It's just, you

1:03:47 ↗ know, it's hard. You know, back to this,

1:03:49 ↗ you know, my first slide that, you know,

1:03:51 ↗ we've been able to be successful in in a

1:03:53 ↗ lot of different cities. Redmond in

1:03:55 ↗ particular, um Belleview as well, um

1:03:58 ↗ Isqua, we've tried to make other

1:04:00 ↗ projects work, but it's just really

1:04:03 ↗ tough. Um the critical areas that Carl

1:04:05 ↗ mentioned, I think that's a really big

1:04:07 ↗ one to focus on. We were we're in the

1:04:09 ↗ middle of an entitlement in Belleview

1:04:11 ↗ near the Belleview Club, if you know

1:04:12 ↗ where that is, just south of there,

1:04:14 ↗ south of downtown. And we went through a

1:04:18 ↗ grueling effort um last fall on the

1:04:21 ↗ critical area updates in Belleview. So

1:04:24 ↗ they adopted critical area buffer

1:04:27 ↗ updates that said the end of current

1:04:31 ↗ pavement is the end of the buffer.

1:04:35 ↗ Right? So like the Hobby Lobby example,

1:04:37 ↗ it's already a parking lot. As long as

1:04:40 ↗ you don't go outside the parking lot,

1:04:42 ↗ you could still build in it in in the

1:04:44 ↗ new Belleview code. That's smart. I

1:04:46 ↗ mean, think about if if you want net

1:04:48 ↗ ecological gain for your streams,

1:04:51 ↗ building new products and capturing and

1:04:54 ↗ treating the water runoff is is far more

1:04:57 ↗ healthy for streams than I forget the

1:05:00 ↗ name of the the pollutant, but it comes

1:05:01 ↗ off the tires. I always forgive. Yeah.

1:05:05 ↗ Yeah. So, right now, all that runoff

1:05:07 ↗ coming off the tires, hitting the

1:05:09 ↗ parking lot, getting rain, washing it

1:05:10 ↗ into the stream. So if you build new

1:05:13 ↗ product multif family or other, you have

1:05:16 ↗ detention basins. You you pull that

1:05:18 ↗ water in, you treat it, and it flows

1:05:20 ↗ back out as clean water back into the

1:05:22 ↗ stream. So it's a true net ecological

1:05:24 ↗ gain if you if you actually build on

1:05:26 ↗ that parking lot versus leaving it as

1:05:28 ↗ is. It's far healthier for the salmon

1:05:30 ↗ and the fish and the, you know, beavers

1:05:32 ↗ and otter and orcas and etc, etc.

1:05:36 ↗ >> I have a quick question. Yeah. So I

1:05:38 ↗ noticed you have three projects in

1:05:40 ↗ Redmond.

1:05:40 ↗ >> Yeah. what type of u things like whether

1:05:43 ↗ it's land use I mean we mentioned that

1:05:45 ↗ why is aquas challenging the topography

1:05:48 ↗ you know different things that make our

1:05:49 ↗ city quite unique what made redmond uh

1:05:53 ↗ so attractive to you

1:05:54 ↗ >> well I I wouldn't say it was more

1:05:56 ↗ attractive it was just achievable to get

1:05:58 ↗ approvals and and they're

1:06:02 ↗ they they actually you know if if you

1:06:04 ↗ want to look at you know the urban

1:06:06 ↗ planning 101 they did a really good job

1:06:08 ↗ they they bought a bunch of old re

1:06:10 ↗ retail They tore it down and built the

1:06:12 ↗ the downtown park if you've seen that

1:06:14 ↗ recently. They have the train station

1:06:16 ↗ that comes a block couple blocks away.

1:06:17 ↗ Then they upzoned everything 10 year 10

1:06:20 ↗ 15 years ago to accommodate that

1:06:22 ↗ housing. So they had a pretty well it

1:06:26 ↗ was not easy and Redmond is not an easy

1:06:28 ↗ place to build either but they they made

1:06:30 ↗ they had a process that we could

1:06:32 ↗ predictable and we could get through it

1:06:33 ↗ and we're willing to risk that capital

1:06:35 ↗ to to get through that process where

1:06:37 ↗ isqua's just definitely been harder

1:06:39 ↗ across the board and the the other thing

1:06:42 ↗ so so Redmond has affordable housing

1:06:45 ↗ requirements with no incentives. So so

1:06:47 ↗ everything in Redmond that you see on

1:06:49 ↗ the screen that we've built in our

1:06:50 ↗ screen here there's three projects. So

1:06:53 ↗ they all require 10% of the units to

1:06:57 ↗ have to be at 80% AMI rents forever with

1:07:00 ↗ no incentives. So theoretically that

1:07:03 ↗ levels out in the land valuation, right?

1:07:06 ↗ So that so there's no guessing where

1:07:08 ↗ Isiziqua has and there's there's an

1:07:10 ↗ MFTTE like a like a trial MFTTE. There's

1:07:14 ↗ like a two.

1:07:15 ↗ >> Yeah.

1:07:16 ↗ >> Yeah. Yeah. So, so Isiziqua, the one

1:07:19 ↗ thing that's tough on Isiziqua is, you

1:07:21 ↗ know, like those are two of the project.

1:07:22 ↗ So, a project called the Charles in the

1:07:24 ↗ top right and a project called Central

1:07:25 ↗ Park on the second from the top right.

1:07:27 ↗ Those are both eightstory buildings. So,

1:07:29 ↗ five levels of wood framing over three

1:07:32 ↗ levels of concrete. They both have one

1:07:34 ↗ level below graded concrete as well. Um

1:07:38 ↗ but the the um I mean

1:07:43 ↗ that that product type is is inexpensive

1:07:47 ↗ compared to a a type one project, right?

1:07:50 ↗ For example. So isqua has rules where

1:07:54 ↗ the taller you build, the more

1:07:57 ↗ affordable units you have to to to

1:08:00 ↗ provide which then does the opposite. it

1:08:03 ↗ it kind of well I mean proofs in the

1:08:05 ↗ pudding so to speak nothing's been built

1:08:07 ↗ right so anytime you layer in

1:08:09 ↗ requirements for affordable housing it d

1:08:12 ↗ it reduces the NOI and reduces the yield

1:08:15 ↗ so what's been happening is nothing

1:08:20 ↗ so so figuring out a way to to properly

1:08:24 ↗ incentivize that affordable housing

1:08:26 ↗ through the MFTTE is really important

1:08:29 ↗ and I I I' I'd advocate for adopting

1:08:32 ↗ what Belleview has done which is a

1:08:34 ↗ 12year MFTTE.

1:08:37 ↗ Um, and that's what that does is 20% of

1:08:40 ↗ the units are 80% AMI rents for the

1:08:44 ↗ 12-ear period. And then that after 12

1:08:47 ↗ years, there's there's two options. One

1:08:50 ↗ is it either is extended by the

1:08:52 ↗ jurisdiction, so for additional 20 12

1:08:54 ↗ years, so 24 years in and probably in in

1:08:57 ↗ perpetuity hopefully, or it that those

1:09:00 ↗ units roll back to market rate.

1:09:02 ↗ So I think that's a fair way to to um

1:09:07 ↗ incentivize

1:09:09 ↗ housing and inclusionary housing. As as

1:09:11 ↗ a citizen, I like inclusionary housing.

1:09:13 ↗ I think you know we as a society tried

1:09:16 ↗ the housing projects over there and the

1:09:19 ↗ market rate housing over there and the

1:09:20 ↗ housing projects over there. That's a

1:09:22 ↗ thing about I have kids. It's like can

1:09:23 ↗ you imagine the school bus pulls up and

1:09:25 ↗ five kids go to the affordable housing

1:09:27 ↗ complex and five kids go to the

1:09:28 ↗ neighborhood. That's just that's just a

1:09:30 ↗ bad policy. So inclusionary housing for

1:09:33 ↗ people and and children especially and

1:09:35 ↗ citizens is a smart idea. As a business

1:09:38 ↗ guy, it makes it hard as well though. So

1:09:41 ↗ have making sure it lines up accurately

1:09:43 ↗ is a really important detail that you

1:09:45 ↗ guys should really focus on. Is it safe

1:09:47 ↗ to say? So it's it's not just city

1:09:48 ↗ processes. It's also the inclusionary

1:09:52 ↗ flux that we have here versus Belleview

1:09:54 ↗ Redmond and then some of the density

1:09:56 ↗ programs that they have.

1:09:57 ↗ >> That's right. Yeah.

1:09:58 ↗ >> We don't have.

1:09:58 ↗ >> That's right. Yeah.

1:10:00 ↗ >> Yeah. And then you know the the critical

1:10:02 ↗ areas are hard. So the crit so the two

1:10:04 ↗ things that I would encourage you to

1:10:06 ↗ really improve on is critical areas and

1:10:09 ↗ looking at Belleview's code and Nicole

1:10:11 ↗ would be happy to send it around but um

1:10:14 ↗ you know having the the buffer end at

1:10:17 ↗ end at the extent of the existing

1:10:19 ↗ pavement is a really smart policy. Um

1:10:24 ↗ and it's in I mean here I think it's 150

1:10:27 ↗ feet right? It's 150 ft from from the

1:10:31 ↗ edge of the of the stream or wetland and

1:10:35 ↗ that's a humongous area, right? So,

1:10:40 ↗ >> if I may, um, great question and I and

1:10:43 ↗ thanks for talking about the land use

1:10:45 ↗ policies which are really important in

1:10:47 ↗ Redmond. I will also point out

1:10:50 ↗ Microsoft,

1:10:51 ↗ >> right? they the employment base that

1:10:54 ↗ they have in Redmond is very strong

1:10:56 ↗ >> and uh we have some great employers

1:10:59 ↗ here. Costco's headquarters, but I just

1:11:01 ↗ want to point out that housing and

1:11:03 ↗ employment go hand in hand and as we as

1:11:07 ↗ an economic vitality commission are

1:11:09 ↗ advocating for more jobs here, uh those

1:11:13 ↗ those employers and employees want to

1:11:16 ↗ also live in the same community. So, I

1:11:18 ↗ just want to point out that synergy

1:11:19 ↗ there. That's really important. And

1:11:20 ↗ don't forget transit, right? Correct. So

1:11:22 ↗ all of these projects we've built in

1:11:23 ↗ Redmond are all within walking distance

1:11:25 ↗ of

1:11:26 ↗ >> at the time future train stations. Now

1:11:28 ↗ they're actually operating, right? So so

1:11:30 ↗ that infrastructure um so investing in

1:11:34 ↗ areas where the the cities are investing

1:11:36 ↗ in themselves is a really important

1:11:38 ↗ concept for us, right? So so making sure

1:11:40 ↗ they have that transit infrastructure

1:11:42 ↗ and I know it eventually will come to

1:11:45 ↗ um hopefully. But um but I mean that

1:11:48 ↗ that's that's really important just to

1:11:50 ↗ be able to get um around different

1:11:52 ↗ regions.

1:11:53 ↗ >> So in the central I know the water table

1:11:55 ↗ where I live

1:11:57 ↗ >> we're even now. Um

1:11:58 ↗ >> it's a rim shot up there.

1:12:00 ↗ >> I live right next to a creek so I

1:12:02 ↗ understand that.

1:12:03 ↗ >> Um central Isiqua do they have the same

1:12:05 ↗ water table issues or is it or does that

1:12:07 ↗ allow underground building because I

1:12:10 ↗ don't

1:12:10 ↗ >> I'll just having just looked at this

1:12:12 ↗ yesterday. Um, so the trail head site

1:12:14 ↗ that's it's 2 feet beneath the ground

1:12:16 ↗ level. So to do anything below grade is

1:12:19 ↗ >> even there next to you just just the

1:12:21 ↗ elevator pits going the Yeah.

1:12:23 ↗ >> Yeah. Just elevator pits going into the

1:12:24 ↗ below grade. So you really have no

1:12:26 ↗ excavation.

1:12:28 ↗ >> And that and that's honestly that that's

1:12:30 ↗ kind of common for the region. Like our

1:12:32 ↗ project in downtown both

1:12:34 ↗ >> same thing, right? We had terrible

1:12:36 ↗ soils. We drove 1,500 piles. The

1:12:39 ↗ neighbors loved that for for for four

1:12:41 ↗ months. We were driving piles, but there

1:12:44 ↗ was the Pete was there and you it

1:12:46 ↗ wouldn't support the building. So, you

1:12:47 ↗ have to drive piles down to support it.

1:12:49 ↗ So, it it's it most cities on the east

1:12:52 ↗ side have some of these complications.

1:12:54 ↗ Not all neighborhoods and areas, but the

1:12:56 ↗ communities can can figure it out.

1:12:58 ↗ >> Like the Highlands probably doesn't

1:13:00 ↗ because Talis did not.

1:13:02 ↗ >> That's right. Yeah. We our our highlands

1:13:03 ↗ project has one level of semib below

1:13:06 ↗ grade but

1:13:11 ↗ >> and so so the central isqua then is

1:13:14 ↗ really on the lake Samameish old lake

1:13:16 ↗ Samameish uh bed right and that's what's

1:13:19 ↗ happening and so in order to um build on

1:13:22 ↗ that area you have to have pilings which

1:13:24 ↗ then also add more more construction

1:13:26 ↗ costs right even more

1:13:28 ↗ >> millions of dollars more millions of

1:13:30 ↗ dollars yeah I mean it's significant

1:13:32 ↗ Um, yeah. And not only that, but this

1:13:34 ↗ the foundations get thicker, right? So,

1:13:37 ↗ when you think of a 6 in slab or an 8 in

1:13:39 ↗ slab or a 12in slab, once again, that's

1:13:42 ↗ millions and millions of dollars that

1:13:43 ↗ you never see or or or there's never an

1:13:45 ↗ experience from any of the residents or

1:13:47 ↗ community. It's just a cost to do

1:13:49 ↗ business.

1:13:54 ↗ I missed my softball game. Any other

1:13:56 ↗ questions?

1:13:58 ↗ I'm happy to I'm happy to answer any

1:14:00 ↗ questions. So,

1:14:00 ↗ >> I I really appreciate um the feedback

1:14:03 ↗ and the information and the education

1:14:05 ↗ and I think it's really important for

1:14:07 ↗ our community.

1:14:08 ↗ >> How can we also educate other

1:14:10 ↗ commissions so that we can sort of all

1:14:13 ↗ be working holistically to help ensure

1:14:17 ↗ that we have affordable housing and have

1:14:19 ↗ more jobs here?

1:14:22 ↗ >> I don't I I don't I don't have a answer

1:14:25 ↗ to that one. I don't I don't know. But I

1:14:27 ↗ I will kind of address your one comment

1:14:29 ↗ about affordable housing.

1:14:32 ↗ The stuff we're building,

1:14:35 ↗ it's not affordable from a from a from a

1:14:38 ↗ low income renter, but it's affordable

1:14:41 ↗ housing. This is you don't have to buy a

1:14:43 ↗ $2 million house. Your rent might be

1:14:45 ↗ make $200 or $3,000 a month, but this is

1:14:47 ↗ this is kind of middle income. It's not

1:14:49 ↗ subsidized and it's not it's not for um

1:14:53 ↗ lowincome people des making minimum wage

1:14:56 ↗ but if you're a teacher making $75,000 a

1:14:59 ↗ year in the Isakqua school district you

1:15:01 ↗ can afford this right so it's not so I

1:15:04 ↗ think this is important for the

1:15:05 ↗ everybody to understand that there this

1:15:08 ↗ this is affordable housing in the grand

1:15:10 ↗ scheme of things right it really is

1:15:17 ↗ and in and just the whole latter effect,

1:15:19 ↗ right? So now, okay, somebody who makes

1:15:21 ↗ $80,000 a year lives here. Well, now

1:15:22 ↗ that opens an apartment that was built

1:15:24 ↗ in 97, you know, that one's now

1:15:26 ↗ available for somebody else. So, so

1:15:28 ↗ increasing supply. I'm a huge GMBB. I

1:15:31 ↗ mean, I have I have no development

1:15:32 ↗ activity happening right now in Isiqua.

1:15:34 ↗ But I I you know, in Samish, there was a

1:15:36 ↗ big fight about the town center. You

1:15:39 ↗ probably heard about that. All my

1:15:40 ↗ neighbors at cocktail parties and Cub

1:15:43 ↗ Scout events and little league games are

1:15:45 ↗ all up in arms and I'm just like, "Shut

1:15:48 ↗ up. Shut up. You the traffic's not I

1:15:51 ↗ mean, no big deal." It's like, "Yeah,

1:15:53 ↗ there'll be there'll be 800 more cars on

1:15:54 ↗ the road, but you know what it you are

1:15:57 ↗ your kids going to live, right? Where

1:15:58 ↗ are the Where are all the kids going to

1:15:59 ↗ live? They're not the answer is not

1:16:01 ↗ here, right?" So, anyway, my wife told

1:16:04 ↗ me to shut up on that one.

1:16:07 ↗ some internal strife.

1:16:10 ↗ So anyway, okay. Well, happy to turn it

1:16:13 ↗ over or I didn't know there was pizza,

1:16:15 ↗ so I might grab some pizza on the way

1:16:17 ↗ out, but

1:16:18 ↗ >> I'll be real quick. Um, you know,

1:16:20 ↗ sharing off of what Carl and Mark had

1:16:23 ↗ noted, um, you know, they they focused

1:16:25 ↗ on the development cycle, right? So

1:16:27 ↗ after they get the deals and the

1:16:29 ↗ partners, it's moving forward with the

1:16:31 ↗ project and having uh well, first I'd

1:16:34 ↗ like to commend, you know, Chris and

1:16:36 ↗ Minnie for taking on that huge list of

1:16:38 ↗ items because that's a great start. And

1:16:41 ↗ I could say, you know, having permitting

1:16:44 ↗ projects throughout the West Coast, even

1:16:46 ↗ in the state of Washington, I could

1:16:48 ↗ share some jurisdictions that are doing

1:16:50 ↗ it sort of expeditiously. Um yeah, the

1:16:54 ↗ the peerreview one is sort of a a tough

1:16:56 ↗ one, right? And I mentioned it at our

1:16:58 ↗ round table that having that core staff

1:17:01 ↗ at the city establishing relationships

1:17:04 ↗ with developers and the community um is

1:17:07 ↗ a win, right? Because you have residents

1:17:09 ↗ that are have concerns. They know who to

1:17:11 ↗ go talk to. Developers have certainty of

1:17:13 ↗ who's being at the city and who's going

1:17:15 ↗ to like kind of be an advocate for them.

1:17:17 ↗ Um I would say you know last decade it's

1:17:20 ↗ been great working with staff on the

1:17:23 ↗ projects every you know currently

1:17:25 ↗ working on the springs it's a little

1:17:27 ↗ different because it's up in the Isqua

1:17:29 ↗ Highlands it's got a development

1:17:30 ↗ agreement but even with that I mean we

1:17:32 ↗ started in 24 and we're hoping to break

1:17:36 ↗ ground here in 26 another year and a

1:17:39 ↗ half of construction you know that's

1:17:41 ↗ four years before the first resident

1:17:43 ↗ moves in and how many you know it's a

1:17:46 ↗ different model because it's senior

1:17:48 ↗ housing. So, it's a little different

1:17:49 ↗ than what Carl and Mark are building,

1:17:51 ↗ but it still takes, you know, I would

1:17:54 ↗ say

1:17:56 ↗ I just looked at the permit fees the

1:17:58 ↗ other day. Plan, review, and permit

1:17:59 ↗ fees, half a million dollars. So, that's

1:18:01 ↗ upfront costs. Developers got to hold on

1:18:04 ↗ to over probably millions of dollars in

1:18:06 ↗ consultants thus far. They're carrying

1:18:09 ↗ costs of the dirt. They haven't closed

1:18:10 ↗ on it yet. They're about to. So, they're

1:18:13 ↗ probably into it, you know, close to 10

1:18:15 ↗ million.

1:18:16 ↗ and they haven't seen much and then the

1:18:18 ↗ hard costs really hit once, you know,

1:18:20 ↗ permits are issued. So all that carrying

1:18:23 ↗ cost um is you know timing it really

1:18:27 ↗ helps I would say um you know we're

1:18:30 ↗ we're looking for flexibility and that's

1:18:32 ↗ built in some of the discussions about

1:18:35 ↗ the permitting aspect um with the

1:18:38 ↗ critical areas in the central

1:18:40 ↗ area. It would be nice to have land use

1:18:44 ↗ and engineering together. Um, for

1:18:46 ↗ example, City of Vancouver has that

1:18:48 ↗ process. It's called a concurrent

1:18:50 ↗ process where you submit your land use

1:18:52 ↗ and you know your engineering plans are

1:18:56 ↗ at like 60% already. So when you get

1:18:58 ↗ land use approval, you basically have

1:19:00 ↗ final engineering to move forward and

1:19:02 ↗ then there's still the building, right?

1:19:04 ↗ And that could fall behind. Most of the

1:19:07 ↗ sites will require some type of piling

1:19:09 ↗ reinforcement that could come later. So,

1:19:13 ↗ it it helps with phasing to get things

1:19:16 ↗ going instead of all in one package

1:19:18 ↗ because then there's just more cost by

1:19:22 ↗ the developers of having to put all that

1:19:24 ↗ into one package versus kind of phasing

1:19:26 ↗ it out. So, that's something to take a

1:19:29 ↗ look at. It's not a one-sizefits-all,

1:19:31 ↗ but at least having that option

1:19:33 ↗ depending on the site specific. It gives

1:19:36 ↗ the developer consultants a way to like

1:19:39 ↗ figure out what's the best path. Should

1:19:41 ↗ it be traditional, you know, land use,

1:19:44 ↗ engineering, and then building or could

1:19:47 ↗ it be consolidated? So,

1:19:50 ↗ um mentioned peer review. It's been you

1:19:54 ↗ it's been a struggle, you know, because

1:19:56 ↗ uh getting multiple multiple pages. I

1:20:00 ↗ don't even need to go into how many, but

1:20:02 ↗ it it's um it's been tough to for our

1:20:06 ↗ team, you know, because we have

1:20:07 ↗ deadlines, too, based on our uh our

1:20:11 ↗ client, they want us to turn things

1:20:12 ↗ around two weeks, right? When you get 72

1:20:15 ↗ pages of comments, it's pretty tough to

1:20:18 ↗ turn that around in two weeks. So, but

1:20:21 ↗ we still met it. you know, it still had

1:20:23 ↗ to be done to meet the timeline of the

1:20:25 ↗ project to keep it going. Um, like I

1:20:27 ↗ said, it all comes down to when they're

1:20:30 ↗ closing on the dirt and they want to

1:20:32 ↗ have permits in hand before they could

1:20:33 ↗ close. So, um, the great thing is, and

1:20:36 ↗ Kristen, I believe there's planned

1:20:39 ↗ action EIS, right? So, that's great. I

1:20:42 ↗ mean, um, Mark and Carl both know that

1:20:45 ↗ SEPHA is usually a big risk. you know

1:20:48 ↗ when when sites are tied up usually

1:20:51 ↗ there's different benchmarks of when you

1:20:53 ↗ know costs or deposits are due and

1:20:56 ↗ usually once you have sea that clears a

1:20:59 ↗ big hurdle right a timing hurdle um

1:21:02 ↗ because once you clear sea generally

1:21:04 ↗ it's you'd like to say cruise control

1:21:06 ↗ with building permits and then

1:21:08 ↗ construction uh even without seepa

1:21:11 ↗ because you've already done the planned

1:21:13 ↗ action is there's as they mentioned the

1:21:15 ↗ critical areas and that that could be a

1:21:17 ↗ challenge

1:21:18 ↗ Um definitely echo what's already been

1:21:21 ↗ said about the buffers. I know city of

1:21:24 ↗ Seattle does it not trying to compare as

1:21:26 ↗ Seattle but there is a process where you

1:21:28 ↗ know edge of existing development is

1:21:31 ↗ your buffer and it's not just wetlands

1:21:34 ↗ it's also all critical are steep slopes

1:21:36 ↗ included. So

1:21:39 ↗ >> yep

1:21:40 ↗ um it's kind of you guys touched on it a

1:21:42 ↗ couple different times and this is more

1:21:44 ↗ of a macro point. So say um the critical

1:21:48 ↗ areas we match what Belleview does. We

1:21:51 ↗ figured out if that's the right thing to

1:21:52 ↗ do. I don't know enough about it, but

1:21:53 ↗ let's just say

1:21:54 ↗ >> um one of the issues you said was the

1:21:56 ↗ land isn't valuable enough to sell. Does

1:21:59 ↗ this now the macro point now all of a

1:22:01 ↗ sudden we create a market and now these

1:22:05 ↗ people who own these larger

1:22:07 ↗ um lots are now going to put it on the

1:22:09 ↗ market. So now there's more land in play

1:22:12 ↗ and but just by having that now that all

1:22:14 ↗ of a sudden creates the flywheel where

1:22:16 ↗ right now if if there's no land to buy

1:22:18 ↗ either you have to over way overpay for

1:22:20 ↗ the land so you actually want to buy it

1:22:23 ↗ right before those changes but that's

1:22:24 ↗ the difference. Um but the um but yes

1:22:29 ↗ does that or I should be in the

1:22:30 ↗ government um just kidding. Uh or does

1:22:33 ↗ that uh um not this government uh does

1:22:36 ↗ it will that make a big enough

1:22:39 ↗ difference to get things started in the

1:22:42 ↗ next few years if there's larger will

1:22:45 ↗ this create a market of more land out

1:22:52 ↗ >> as soon as the policies are in place

1:22:54 ↗ that allow development to occur the you

1:22:58 ↗ know by default the land value will

1:23:00 ↗ increase then incentive advising those

1:23:02 ↗ land owners to consider selling, right?

1:23:06 ↗ So that's the that's the the hard part.

1:23:08 ↗ That's, you know, that's the reality.

1:23:10 ↗ But by implementing these those those

1:23:12 ↗ policies, the land value will increase

1:23:14 ↗ because of what can be built on it.

1:23:15 ↗ >> I mean, there's a you know who all the

1:23:17 ↗ land owners are. Rowley owns a lot of

1:23:19 ↗ it. And I'm not sure if that's an issue

1:23:20 ↗ for them, and there's the ones who own

1:23:21 ↗ I'm not sure who owns the Hobby Lobby

1:23:23 ↗ area, and there's some other ones. Um,

1:23:26 ↗ have they given you that direct

1:23:29 ↗ feedback that says, "Hey, it's it's

1:23:30 ↗ worth, you know, X, but if it was worth

1:23:32 ↗ 3X, I would now I would I would sell you

1:23:35 ↗ this property." Or is it

1:23:36 ↗ >> Well, like like the Hobby Lobby, it was

1:23:39 ↗ on the market a few years ago. Did it

1:23:41 ↗ sell somebody

1:23:42 ↗ >> sold to a a retailer?

1:23:44 ↗ >> Yeah. So at a long term, like we'll just

1:23:46 ↗ >> Yeah. So the So the highest and best use

1:23:48 ↗ of that land was to keep it as is. So it

1:23:51 ↗ traded for the a cap rate on the current

1:23:53 ↗ operations income from that from that

1:23:56 ↗ asset. So the land value was less than

1:23:59 ↗ the than the shopping center value.

1:24:01 ↗ >> So the so the best the best most

1:24:03 ↗ valuable use. So in in Redmond, I used

1:24:06 ↗ to work in Redmond. Um the old Sears

1:24:08 ↗ complex is now turning into

1:24:11 ↗ >> um multi-use, multif family, whatever.

1:24:13 ↗ All that

1:24:14 ↗ >> that what made that happen?

1:24:17 ↗ >> Land use policy. That was the change

1:24:19 ↗ that was that was the trigger that

1:24:20 ↗ happened. Transit.

1:24:21 ↗ >> Yeah. Yeah. Transit as well, right? So

1:24:23 ↗ the the land's policy changed

1:24:26 ↗ long before Sears went away. But yeah,

1:24:29 ↗ that's right. And

1:24:30 ↗ >> just those a lot of these sites are

1:24:32 ↗ outdated, right? Like what a Sears pad

1:24:34 ↗ is not worth what it used to be. But if

1:24:37 ↗ you're not able to redevelop it into

1:24:39 ↗ something else, it sits and someone

1:24:40 ↗ finds a use for it, but it's not the

1:24:42 ↗ highest and best use if you just took

1:24:44 ↗ the restrictions off at some level. So,

1:24:46 ↗ a lot of these sites that these retail

1:24:48 ↗ strip centers and you know smaller um

1:24:50 ↗ you know outdated office buildings,

1:24:52 ↗ they're worth what they're worth today

1:24:53 ↗ because you can't do anything else with

1:24:54 ↗ them. But if they're if there was more

1:24:56 ↗ flexibility on what you could do with

1:24:58 ↗ them, the value would be certainly

1:24:59 ↗ higher than what they're current.

1:25:00 ↗ >> So residential has a higher value than

1:25:03 ↗ you know office offices like what's

1:25:05 ↗ happened off of Eastgate too. You're

1:25:07 ↗ seeing those.

1:25:08 ↗ >> Yeah, we're we're building off of

1:25:10 ↗ Eastgate and Eastgate. Yeah. There's two

1:25:12 ↗ big cranes in the air. That's those are

1:25:13 ↗ our deals. The but the offices are

1:25:16 ↗ unique but I mean a lot of times the

1:25:18 ↗ office buildings are being purchased and

1:25:20 ↗ torn down to replace with residential

1:25:23 ↗ be yeah because yeah because of because

1:25:25 ↗ the office income and the value on the

1:25:28 ↗ office asset is lower than the land

1:25:30 ↗ value. the land value is higher, right?

1:25:32 ↗ So, it's just it's simple economics at

1:25:35 ↗ the end of the day, but if the policy is

1:25:37 ↗ not there to allow the construction to

1:25:39 ↗ occur, that land value remains low.

1:25:44 ↗ >> And I also want to point out what I'm

1:25:46 ↗ hearing is that there's no one silver

1:25:49 ↗ bullet.

1:25:50 ↗ >> That's right.

1:25:50 ↗ >> Right. There's there's a lot of policy

1:25:53 ↗ on the table here to take to look at and

1:25:56 ↗ there's not one solution that's going to

1:25:59 ↗ unlock the floodgates is what I'm what

1:26:01 ↗ I'm hearing. And I and on that note, I

1:26:05 ↗ think you know our charge as commissions

1:26:09 ↗ and policy makers is to figure out how

1:26:14 ↗ to calibrate that those policy changes

1:26:17 ↗ so that they're effective in achieving

1:26:19 ↗ these housing outcomes that we have been

1:26:21 ↗ charged with, right? And I think Title

1:26:24 ↗ 18

1:26:25 ↗ was a huge undertaking and PBC in

1:26:28 ↗ particular did a lot of work on Title

1:26:32 ↗ 18. And I and I think that there are

1:26:35 ↗ perhaps some lessons to learn about

1:26:37 ↗ calibration uh and collaboration. And I

1:26:40 ↗ think this is awesome. I think it's so

1:26:42 ↗ great that we can collaborate and start

1:26:45 ↗ Kristen said trust, right? figure out,

1:26:48 ↗ you know, we're building that trust and

1:26:50 ↗ and I guess my hopes and dreams are that

1:26:53 ↗ this is not just a one-off conversation

1:26:57 ↗ and that that calibration can happen

1:26:59 ↗ together, you know, between commissions

1:27:01 ↗ with the private market. And I don't

1:27:03 ↗ know if you guys have any thoughts about

1:27:04 ↗ how you see that ongoing collaboration

1:27:06 ↗ going.

1:27:07 ↗ >> Yeah, I'm I'm I live locally. As long as

1:27:10 ↗ I don't miss a softball game, I'll I'll

1:27:12 ↗ I'll be here. Um, I mean, I'll just I'll

1:27:16 ↗ I'll answer it a little bit, but just

1:27:18 ↗ one more important thing here that the

1:27:20 ↗ policy needs to be out in front, right?

1:27:22 ↗ Because I mean, right now, our the

1:27:24 ↗ multifamily housing industry is

1:27:26 ↗ effectively been in a recession for

1:27:28 ↗ almost four years now, right? So,

1:27:30 ↗ positioning the policy so that you can

1:27:32 ↗ kind of catch the next upcycle

1:27:35 ↗ because if the policy is not there in

1:27:37 ↗ the next upcycle, you missed it last

1:27:38 ↗ cycle, right? you missed last cycle

1:27:41 ↗ where you know only a handful of

1:27:42 ↗ buildings got built here and only a

1:27:44 ↗ couple hundred units were built. So

1:27:46 ↗ getting the policy squared away so that

1:27:49 ↗ you catch that next economic upcycle and

1:27:52 ↗ that could be three or four or five more

1:27:53 ↗ years away but the pol but but once

1:27:55 ↗ again it takes two or three years to

1:27:56 ↗ entitle and design these buildings. So

1:27:59 ↗ making sure the policy is square to

1:28:00 ↗ catch the next economic cycle is the

1:28:03 ↗ only shot you have to meet those goals.

1:28:05 ↗ I would say, you know, Hobby Lobby is a

1:28:07 ↗ great example just because we're all

1:28:08 ↗ talking about it and we all know what it

1:28:09 ↗ is and none of us own it. Um, but the

1:28:14 ↗ even if you got rid of all the critical

1:28:15 ↗ area restrictions, that site today under

1:28:18 ↗ title 18 is still probably not

1:28:21 ↗ buildable. I mean, a economically I

1:28:23 ↗ don't think it's buildable with where we

1:28:24 ↗ are in the world today. But just with

1:28:27 ↗ title 18 and the complexity of the code,

1:28:29 ↗ there's a lot of work to do in the code

1:28:30 ↗ itself as as Mark was saying to free up

1:28:34 ↗ when the time comes that development

1:28:35 ↗ does make sense for you to be able to

1:28:37 ↗ go. It's an economic issue at a macro

1:28:39 ↗ level, but at a local level, there's a

1:28:41 ↗ lot of policy work that needs to be done

1:28:43 ↗ in my opinion.

1:28:44 ↗ >> Share something. Um, you mentioned the

1:28:47 ↗ Redmond project in Over Lake. So, the

1:28:50 ↗ city was involved as a partner as well.

1:28:52 ↗ They built the stormwater regional

1:28:54 ↗ facility on the far east side. That was

1:28:56 ↗ the first thing that got constructed to

1:28:59 ↗ allow the rest of that to develop. So

1:29:01 ↗ I'm not sure if the city's public works

1:29:03 ↗ department has looked at, you know, the

1:29:04 ↗ central misqua basin to see if there is

1:29:08 ↗ some type of possibility of building a

1:29:10 ↗ regional facility because that would

1:29:11 ↗ help. Besides the policy, you know, if a

1:29:14 ↗ regional facility was there and

1:29:16 ↗ developers just had to pay a fee in lie

1:29:18 ↗ of to, you know, connect to it, that's

1:29:20 ↗ something predictable versus engineering

1:29:22 ↗ something that, you know, could take

1:29:25 ↗ years. So, I'm not sure if that's, you

1:29:28 ↗ know, Carl would like look at.

1:29:30 ↗ >> Yeah. Centralistic is a little unique. I

1:29:32 ↗ know in storm water considerations, but

1:29:34 ↗ I mean that those type of ideas where

1:29:36 ↗ there's there's, you know, public

1:29:37 ↗ private partnership at some level. I

1:29:38 ↗ mean, anything to eliminate uncertainty

1:29:41 ↗ and anything to eliminate time are are

1:29:44 ↗ the biggest levers that you all have,

1:29:45 ↗ right? Cost, you can't you can't control

1:29:47 ↗ how much it costs for me to go buy

1:29:48 ↗ lumber and steel, but you can control

1:29:51 ↗ how long it takes for me to get through

1:29:52 ↗ the process and how hard it is.

1:29:57 ↗ >> Okay, we could do this for a long lot

1:30:00 ↗ longer.

1:30:01 ↗ >> Feel free to email us, call us,

1:30:02 ↗ whatever. We're the goal is to be

1:30:04 ↗ accessible to you all.

1:30:05 ↗ >> Yeah. No. And I definitely want to uh

1:30:07 ↗ tell Carl and Mark and Michael, I

1:30:09 ↗ believe,

1:30:10 ↗ >> how much we appreciate you guys missing

1:30:12 ↗ softball games coming in here um

1:30:15 ↗ providing an education. And to Kim's

1:30:18 ↗ point, I hope this truly is the

1:30:19 ↗ beginning of something because I learned

1:30:21 ↗ a lot. You know, we sit in a silo often.

1:30:24 ↗ We get fantastic information, but

1:30:26 ↗ sometimes we don't have all the partners

1:30:27 ↗ at the table to make these big

1:30:29 ↗ decisions. And um yeah, so I I truly

1:30:32 ↗ hope that we see more of you guys

1:30:34 ↗ because again, I I know John and I were

1:30:36 ↗ scribbling back and forth. There were

1:30:38 ↗ some great ideas that we'd like to bring

1:30:39 ↗ to staff and see what they have to say.

1:30:41 ↗ Um so again, the first hopefully of many

1:30:44 ↗ conversations.

1:30:46 ↗ We are going to need to wrap up. Usually

1:30:48 ↗ I would say round table, let's all talk

1:30:49 ↗ about this for a few more minutes, but

1:30:51 ↗ uh we do have one other meeting this

1:30:54 ↗ evening. So, I also want to say thank

1:30:56 ↗ you to our fantastic staff, Minnie,

1:30:58 ↗ Kristen, Amanda. I know I'm going to

1:31:00 ↗ miss some people here.

1:31:03 ↗ >> Alexis, thank you, Alexis. Um, everybody

1:31:07 ↗ for putting this together. And I

1:31:09 ↗ definitely want to thank the EVC for

1:31:11 ↗ coming in on one of their nights off to

1:31:14 ↗ come in and uh join this time with us.

1:31:16 ↗ Um, like I said, I hope we do this more

1:31:18 ↗ often. I think the last time we did this

1:31:19 ↗ was two years ago and we were talking

1:31:21 ↗ about the MF MTFE. it went out of our

1:31:25 ↗ hands at some point. But again, this is

1:31:27 ↗ good work that we try to do together.

1:31:28 ↗ And hopefully, yeah, there's more

1:31:29 ↗ synergy between the commissions because

1:31:31 ↗ I think it's fruitful. I think it's

1:31:32 ↗ helpful. I think we all learn from your

1:31:35 ↗ guys's expertise. Hopefully

1:31:38 ↗ also for from our expertise. So again,

1:31:41 ↗ just want to thank everybody. We're

1:31:43 ↗ going to adjourn and then what do you

1:31:45 ↗ think Kristen? about a fivem minute

1:31:46 ↗ break to reset. Okay. So we will adjourn

1:31:49 ↗ this meeting of our joint meeting of the

1:31:51 ↗ EVC and PPC at 7:02. Thank you for

1:31:54 ↗ coming.

Minutes for this meeting haven't been published yet. Council and committee minutes are approved at the next meeting and embedded as a consent-calendar attachment in that meeting's agenda packet — they will appear here once that next packet is processed.