Sixteen-inch-thick concrete walls. Rooftop gardens. A 90 percent reduction in energy use compared to current building codes.
Amid a flood of new and redeveloped apartment construction in the Kansas City area, those things stand out about a $60 million apartment project slated for the Missouri riverfront just north of downtown.
Named Second and Delaware, a nod to the nearest intersection, the 276-unit project will bring greener-than-green technology to a large residential building.
According to national experts and the development team, its two buildings will comprise the largest U.S. multifamily apartment project using Passive House Institute-certified construction, a system that’s more energy-efficient than the highest LEED (Leadership in Energy and Environmental Design) building standard.
The certification requires radical reduction in energy consumption through a well-insulated building envelope and an energy recovery ventilation system that reduces heating needs in the winter and cooling needs in the summer by about 90 percent from comparable-sized apartments.
The project also is using an unusual team, or “lean,” approach to building multifamily housing, designed to reduce costs by reducing construction delays. And down the road it may offer tenants a rare opportunity to become investors, more like owners than renters.
Jonathan Arnold, the lead developer, said he’s committed to “build one project to embrace all the best practices of sustainable development, urban design and cost-effective construction.”
He’s bringing to Kansas City years of international research after being appointed in 2011 to work on a United Nations sustainable development effort that scouted the world to find housing solutions “that can be implemented, are ready to scale and are financially feasible.”
If Second and Delaware works as planned — and tenants begin moving in in February 2017 — Arnold said, “we’ll have a model that fits on a true triple bottom-line return — profit, people and planet.”
Large Passive House-certified multifamily structures exist in Europe, but Ashok Gupta, with the Natural Resources Defense Council, predicts that Second and Delaware will bring national attention to Kansas City, “much like Google Fiber did when it came to Kansas City first. People will talk about it, show it off. It will be the first of a kind in the country in terms of bringing this passive technology to large apartment building.”
The scale is important, because that’s what attracts institutional investors and makes the concept replicable elsewhere.
For now, Second and Delaware is capturing attention because of its plan for walls that sandwich insulation in between concrete panels. The construction is touted not just for energy efficiency but for durability. Planners say its concrete walls will withstand all kinds of weather and last for 200 years — far more durable than the wood-frame construction of new apartment buildings.
The ambitious project, nearly three years in planning, is slated for a four-acre property that’s now part gravel lots, part brush-infested riverbank. It previously was introduced to a Kansas City Council committee as “undevelopable.” The site is bisected by a crumbling driveway, has two markedly different elevations and needs infrastructure improvements.
Arnold’s development group obtained a $2.9 million commitment from the city to finish Second Street west from where it now ends at Delaware Street and help build a half-acre neighborhood park on the west side of the apartments. The developers also will vacate Delaware, which now peters out as it heads down the riverbank toward a nonexistent First Street.
By October, Arnold hopes to begin excavation on the site, the first step toward building 500 underground parking spaces that will be available for tenants and others. Parking is a necessary part of the project, but Arnold is most interested in creating a “walkable neighborhood” that embraces “all the best practices of sustainable development, urban design and cost-effective construction.”
Already, the 276-unit development is gaining national acclaim for being built under a process called “target value design.” The method changes traditional apartment building processes that start with architects handing off renderings to structural engineers to make the design work, who then hand off the plans to contractors and subcontractors to build.
“It costs a lot of money, and you don’t always get full value for the money,” said Hal Macomber, principal at Lean Project Consulting, who has been working with Arnold on a more collaborative design/build process to eliminate construction cost overruns because of scheduling delays.
“All it takes is one slow hiker in the line, and everyone’s late for dinner at the campsite,” Arnold said, explaining how the process pulls the entire development team together for planning meetings from the outset of the project. “It’s a relentless pursuit to eliminate waste from the process.”
He said Second and Delaware will be built by a team that “started with the last step — the finish of an apartment unit — then worked backward to ensure that the people who are going to be building the building are developing the schedule, then staffing the project so work never stops to wait for a subcontractor.”
The Kansas City-based team, organized as the Smart Growth Group, includes representatives from Western Forms, a concrete wall manufacturer; HarenLaughlin, the construction manager; Palmer Electric; Greenfield Mechanical; Nebel Construction Services; John Rohrer, a contractor; Direct Design Enterprises, the architect; Staengl Engineering; and CEO Structural Engineers. The team meets weekly for planning.
‘Turning renters into owners’
Although the buildings’ energy efficiency is the most unusual feature compared to other multitenant housing, Arnold also hopes to pioneer another difference: He would like eventually to introduce a financing plan that will allow renters an option to build equity, instead of just paying rent, by purchasing shares in a real estate investment trust.
The concept needs more than one apartment project to make the tenant REIT idea work on a large enough scale, but Arnold is dreaming big.
“The REIT model has the potential to revolutionize the rental housing market by effectively turning renters into owners in the underlying real estate assets,” he said. “Within a generation, entire neighborhoods made up of sustainable, long-lasting, multifamily housing could be ‘owner-occupied’ and debt free.”
Meanwhile, Arnold worked through a long process to obtain construction and permanent financing loan guarantees from the U.S. Department of Housing and Urban Development. The 40-year amortization period and low fixed-rate interest made the project feasible.
So, too, did Kansas City’s authorization of a 10-year, 100 percent tax abatement during which time the developers will pay only existing property taxes on the site. That will be followed by a 15-year, 50 percent property abatement on the improved value. The developers also will pay annual payments in lieu of taxes of $20,000.
Jack Holland, with the insurance and investments company of Ameritas, coordinated bond financing for Second and Delaware through a Calvert fund focused on environmentally and socially responsible investing.
“Given the likelihood that this project will still be around in 100 or more years, it’s worth the higher upfront investment,” Holland said. “The energy savings are so significant under passive-house standards.”
Given that the project is unusual, Holland said, “it’s going to take a little bit of explaining to investors.” But the project already found favor with several Kansas City area investors and has captured attention from national investors as well.
Planners point out another socially responsible part of the Second and Delaware deal: One-fifth of the apartments will be allocated for qualified renters who earn half of the average median income in the Kansas City area. Those units will be sprinkled throughout the complex. Fellow tenants won’t know who’s paying market rate and who has a price break based on income.
Arnold also emphasizes an environmental advantage to the project location. It’s located about a block from Kansas City’s incoming streetcar line, a fact that could reduce the need to drive cars by renters who work within the downtown, Crossroads and Crown Center areas served by the line.
Second and Delaware will:
▪ Break ground in October.
▪ Offer 276 apartment units in two buildings.
▪ Fill the last undeveloped ground between the River Market and the Missouri River.
▪ Meet the highest energy efficiency standards of any U.S. apartment building.