When Steve Patterson joined The Related Group in 2010, the company’s multifamily rental division had no employees. Patterson initially “borrowed” team members from Related’s other divisions, which specialize in condos and affordable housing, to get the ball rolling. Today, Related Development has delivered about 4,000 units and has roughly 3,000 more under construction.
Patterson, president and CEO of Related Development, where he’s responsible for all of the company’s multifamily rental and mixed-use development activities, says the company will likely start another 3,000 units in the next year or so.
Related held a grand opening ceremony last month for its first project in Georgia, a 39-story tower in Atlanta. The development is part of Miami-based Related’s growing “Icon” brand, which the company says leverages demand for luxury rental residences throughout urban-core neighborhoods and targets the rapidly growing “renter by choice” segment. Icon towers include Icon Las Olas in Fort Lauderdale, Fla.; Icon Harbour Island and Icon Central in Tampa Bay, Fla.; and Icon Buckhead in Atlanta.
Now, Related Development is setting its sights beyond the Southeast, having launched an operation in the Southwest with an office in Dallas. Patterson, who has experience working in the region, says the move makes sense for his company.
“We’ve been watching the Florida markets mature and land prices grow. Obviously, the same thing is happening in the Southwest, but even though we have three legs to our overall corporate stool, I like for my group to have regional diversification,” he says. “And that means that we’re relying on different sectors of our economy to drive demand for our product so that my own profit center is more stable as a result.
“We knew we were ready,” Patterson adds. “We sort of hit critical mass and were fully staffed in our Atlanta office and our Miami office, and it felt comfortable to make the next expansion.”
Related Development will focus initially on Phoenix and Las Vegas, Patterson says. It hasn’t yet closed on any land but is in negotiations for several parcels in both markets. Patterson says Related will be announcing projects soon and says it’s probably more than two years away from delivering any product in the region.
The firm is also steering clear of the Texas markets—at least for now. “We’re giving Texas cities a breather, primarily because of what we perceive to be overproduction,” Patterson says, adding that Houston isn’t one of the cities “overproducing.”
Patterson says most of the development this cycle has been mid-rise or high-rise product in infill locations because more cities, in addition to offering job opportunities, have become pedestrian friendly, so residents are moving from the suburbs and giving up their cars. “It doesn’t require a major budget shift,” he says, for people who sell their cars, move into an infill location, and pay more in rent.
But Patterson expects infill development will continue to cool down in the near future. “It would appear there’s a lot of liquidity in the marketplace,” he says. “There’s a lot of head scratching as to where that money is going to be to work. I think we’re going to see a reduction in building starts in 2018 over the trailing 12 months. There’s a decline, and I think that’s resulting from a conscious awareness of this fear of overbuilding.
“I really believe that people are paying attention and trying to do the right thing,” Patterson adds. “I think we’ll have similar levels of production going forward, but I think you’re going to see the production levels move more into a more affordable group—mid-rise and low-rise—as opposed to the sheer magnitude of the infill high-rise that we’ve had.”
