Jim Grauley

MIAMI—Columbia Residential has built its business with a steady flow of affordable housing and recently launched a new venture focused on non-LIHTC opportunities in the Southeast. Columbia also undertook the comprehensive adaptive re-use of the Imperial Hotel in Downtown Atlanta, so its executives are well-positioned to discuss the trends adn challenges.

We caught up with Jim Grauley, president and COO of Columbia, to get his take on the multifamily sector and adaptive re-use trends. Come back this afternoon for part two of this exclusive interview, which will dive deeper into adaptive reuse insights.

GlobeSt.com: Do you see any major changes occurring in multifamily development with interest rates rising?

Grauley: We have been in an environment of historically low rates—and in a time when lack of supply has now brought the multifamily market back significantly. Rising rates over these extraordinarily low levels will bring financing market back into more historical normal situation.  

This does not mean that projects can’t get done, but they will not be able to overly rely upon these low rates. Equity returns will have to be there and more subsidy on affordable side. The gap just adjusts with what can be underwritten for the debt portion.

GlobeSt.com: Is your firm doing more multifamily development this year than last year? If so, why? If not, why not?

Grauley: Columbia Residential was fortunate to remain active throughout the recession and emerge stronger. We continue to keep pace with three to five new transactions per year.  

The bulk of our business is affordable and mixed income and relies upon low income housing tax credit allocations. We have recently started a new venture—Columbia Ventures, LLC—to focus on non-LIHTC opportunities we see in our core markets.  

We expect first closings on those transactions in first half of 2014. We are seeing states limit tax credit allocations more so while Georgia continues to be our home state, we are focusing our capacity towards different type of projects in market and on adjoining states where we find opportunities.

GlobeSt.com: What’s in store for 2014 in your multifamily development pipeline?

Grauley: We expect to have four or five new projects close in 2014, a mix of affordable-LIHTC, renovations via affordable financing sources, and new market rate transaction. We continue to be most active in Atlanta, but have new projects closing in Athens, Columbus, GA as well as projects in New Orleans, LA and Spartanburg, SC.

GlobeSt.com: Where do you see the opporunities in adaptive reuse?

Grauley: Adaptive reuse has always been an opportunity—particularly when a building has unique / non-replaceable characteristics, and when it is located in a strong, hard to  replicate, location. Also, in many cases the building core can be purchased for less than replacement cost and in historic buildings, projects can utilize historic renovation credits and incentives to allow for feasibility.  

Columbia Residential undertook the comprehensive adaptive re-use of the Imperial Hotel in Downtown Atlanta. The location for this building that houses special needs tenants is unique and very valuable—near transit, jobs, services—and the building is an Atlanta landmark.  

A complicated multi-layered financing transaction is allowing for a complete historic renovation, transforming building into LEED Gold energy efficiency and creating 90 state of the art efficiency apartments for special needs tenants downtown. The Imperial is currently under construction and is slated for completion at the end of this year.  

Columbia also is taking on an adaptive reuse of another historically significant building in Downtown Atlanta converted to market rate apartments. In New Orleans, we are adapting historic housing structures and new construction to create an early childhood education facility for 150 children—ages zero to five—through adaptive re-use utilizing New Markets Tax Credits and philanthropic financing.