Amenities Not Necessary But it’s not just the fact that Gables is developing projects that makes the company different; it’s the type and size of the development properties that makes Gables stand out.
Conventional wisdom would dictate that higher rents are synonymous with a higher quality amenity package, says Wheeler. But Gables disagrees. Gables believes that residents of truly high-end properties already belong to the best health club in town and that they already own several computers. “They’re not going to come use your pool because they’re not going to come hang out with a bunch of teenagers,” explains Wheeler. “This clientele isn’t going to put on their bathrobe in the morning and come down to your business center and send a fax. They’ve got a fax machine in their home.
“So, as you move up the rent scale, the amenity scale can go down,” he says. “This is a hard thing for many developers to understand.”
In fact, some of Gables’ highest-end properties have no community amenities. Gables believes the customer at this level cares about security, privacy and the quality of the unit. “As we’ve moved up the scale in terms of a higher profile renter, we’ve used the money that we would have spent on the amenity package and spent it on the interior of the units – in terms of quality finishes, marble counters, better plumbing fixtures and bigger units,” says Wheeler.
Another difference about Gables and its development philosophy is the number of units it’s building per community. The company is trending toward smaller properties in terms of number of units.
If all things are equal – i.e., the quality of unit and the amenities package – Gables believes residents would prefer to live in a 40-unit community vs. a 300-unit complex.
There are several reasons why Gables is targeting smaller projects in its future development pipeline. First, the company believes it will be easier to go through the entitlement process and that neighborhood opposition will be considerably less.
Second, Gables believes the customers prefer smaller properties. Third, smaller properties make excellent condo conversions. Finally, Gables believes it has carved out a niche for itself. “The private guys can’t finance this type of deal – it’s too small,” he explains. “Where do you go to finance a $4 million deal? You can’t do it. Their financing sources all want to do $20 million, $30 million, $50 million deals. For the larger players, a 40-unit deal is not really going to impact earnings. They’ve got to do big stuff in order to get growth.”
And in the end, turnover is lower at smaller properties because the residents really get to know their neighbors, they become part of a neighborhood and they don’t want to leave, he says.