Changes on the horizon: Lot 24 / by EpicDevelopments



In the coming months, a new residential project from the team that brought Pittsburgh the Cork Factory will open up across the street called Lot 24. And while most look at the project as just another bourgie housing option,the project is actually much more significant in the great scope of market. Its something that if it succeeds could drastically change the landscape of Pittsburgh's housing market.

 
What makes Lot 24 different isn't the design (though very few have delivered mod apartments like these) or the amenities; its something much more boring but significant, the financing.  Lot 24 is the first market built apartment complex of any size/scope the city of Pittsburgh has seen in decades.  Some scratch their head on this.  But when you look at the projects that have been delivered to date; Cork Factory, Heinz Loft, Southside Works Lofts, the new Southside High project; you realize that they all have one thing in common, soft money.  In most cases its the URA working on behalf of the city to bridge the financing but others have federal monies, foundation funds and other sources.  But Lot 24 is decidedly different.  The team was able to go to the market and get financing purely based on the rental stream that this new building claims it can achieve.
So why is this detail so important rather than a footnote.  Two reasons.  The first, new build construction is expensive, very expense.  Even if you are able to use the shell and tap into existing sewer/water lines like at the under construction Locomotive Lofts in Lawrenceville, it can be very advantageous from a cost perspective.  For a team to pursue a new build project in Pittsburgh and justify the high rents associated, it demonstrates the strength in the market today.  People increasingly are looking for convenience and ease of apartment living are willing to pay for it.  If you want proof to this statement look on Craigslist or PadMapper and try to find any decent looking apartment in the city.  You are hard pressed to come back with more than two or three options at best.

The second reason is that this project will add to solidifying investors, bankers, and otherwise that Pittsburgh is a market that is maturing.  Ten years ago, no pension fund or insurance company was looking to Pittsburgh for revenue streams.  Yet at Lot 24, it seems that the deal was not only funded but was so competitively, with multiple groups vying for a piece of the pie.
So what does all this mean for the future of Pittsburgh?  If this project succeeds as planned it could be a significant indicators of the rental strength of the market bringing more national firms (like PMC converting office to over 1,000 proposed units in town) in the market place.  It could also serve as a model for banks to  lend to projects looking to cover the financing for the entire project, rather than stressing/relying on soft money.  To the masses, that means more options for housing.  Downtown, East Liberty, the Strip, Uptown.  These are all areas that are poised to expand their housing markets if they could count on projects like Lot 24 becoming the norm rather than the exception.  Fingers crossed!