WASHINGTON, DC-Developers, both local and national, are circling the DC area, interested in building multifamily projects here that will take advantage of the demographics and local economy. The latest example is Atlanta-based Post Properties, which has announced it will begin construction on a 344-unit luxury apartment building as part of phase two of its Carlyle Square apartment project in Alexandria, VA. Development costs for the project are a reported $95 million, with the first units expected to deliver in the second quarter of 2012. 

Post Properties’ numbers for the project are very strong, Marcus & Millichap’s Stacey Milam, a first vice president investments and director of the firm’s National Multi-Housing group in Washington, DC, tells GlobeSt.com--especially considering how aggressive its rents are throughout its area portfolio. 

Not all projects, though, are moving forward because, unlike Post Properties, the numbers still aren’t working. Post has said it is funding the construction through unsecured lines of credit. But other DC developers looking for financing are running up against lenders that are still underwriting to very conservative metrics. 

"Construction financing has definitely become more available," Milam says. "Banks are very bullish on concrete slabs that are over five stories, Texas donuts (where the parking is below ground) and garden-style projects that are stick built, as they are more cost effective."

But they are underwriting deals for garden-style apartments at a $2.40 to $2.60 per square foot range. High rises may go for as much as $3 per square foot, Milam says. These numbers are doable, but only if the land hasn’t traded in a while--specifically since 2006. "Anyone who purchased land after 2006 paid too much for it," he says. "The price was likely based on condo outsales and the numbers just won’t work. Banks won’t underwrite a deal with rents penciled in at $4.50 per square foot, which is what land as those prices will require." Developers holding onto land from that time will have to wait at least five years before the underwriting and project costs meet at an acceptable point, Milam concludes.