Building green in a ‘brutal’ market

 

The weighty crystal award that a Yonkers real estate developer recently picked up in Washington, D.C., was on display at the sales center at Overlook Pointe, a residential development overlooking the Hudson River where construction activity this spring could signal a long-awaited turn in the region”™s housing market.

“We”™re very honored by this,” said Mark C. Eickelbeck, chief operating officer of AVR Homebuilders, a division of AVR Realty Inc. in Yonkers. He was speaking of the 2012 Energy Star Partner of the Year award presented to his company by federal Environmental Protection Agency officials. Adding to the honor, AVR was one of only two residential developers in the nation to receive the award as a new homebuilder.

“Overall, we kind of fly under the radar,” Eickelbeck said of AVR, whose homebuilding division, while delaying the start of some of its projects in the region, seems to have survived what he called the “brutal, extremely difficult” housing market of recent years better than many of its competitors.

Founded by owner Allan V. Rose, AVR Realty Inc. has built, acquired and developed more than 30 million square feet of commercial and residential space nationwide in its roughly 45-year history. Its diverse properties include the Port Chester Shopping Center, anchored by Kohl”™s Department Store; The Roosevelt, a Waldorf-Astoria hotel in New Orleans and the AVR hotel division”™s flagship property, and The Waterfront at Fishkill, an ongoing mixed-use development on about 275 acres in Dutchess County that AVR acquired from a bank in the late ”˜90s. It  includes a retail shopping center, a former industrial park and a string of completed housing developments in West Fishkill. At Overlook Pointe, the company”™s currently active, approximately $55-million project there, AVR plans to build 263 condominiums and townhouses on the site of a former brickyard that supplied Manhattan”™s builders.

“One of our strengths as a company is the ability to migrate across types of real estate,” said Eickelbeck. In the economic downturn, “multifamily has been fantastic, and a growing part of our business.” AVR owns about 6,000 apartments, including properties acquired in Texas, Louisiana, South Carolina and Florida. “As the recession hit, we saw more of  a demand for rentals,” he said.

At Overlook Pointe, AVR started construction about 1 1/2 years ago ”“ after adding less expensive condos and smaller-sized townhouses to its design plans — and completed its models in March. “We really feel that the market has bottomed,” said Eickelbeck. “We”™re certainly close enough to call it a bottom.”

In Southampton on Long Island, the Yonkers developer has been selling four to five custom-built homes a year on its 52-acre development site, Eickelbeck said. At Powell Cove Estates, a 202-condo development on the East River in Queens, AVR has sold about 40 units a year since starting construction in 2008.

“There we reacted to the market and just dropped our prices ”“ a $30,000 reduction across the board,” he said of the Queens project. “We went from no sales to lots of sales.”

At Overlook Pointe, one-bedroom to three-bedroom condos start at base prices that range from $280,000 to $350,000,  and townhouses are priced at $376,000 to $421,000. Those prices have brought “a lot of traffic coming up here” from higher-priced Westchester County, he said.

“You have kind of a broad buyer pool, but we”™re actually seeing an older buyer who”™s able to move today,”™ said Eickelbeck. “A lot of people are looking at this as their last purchase.”

Since last November and December, Overlook Pointe”™s marketers have seen a change  “in the quality and volume of traffic that”™s coming out. We”™re seeing serious buyers.”

But first-time homebuyers have left the market since the federal tax credit program for purchases of first homes ended in 2010. “That”™s one of the challenges we”™re facing, is getting young people back into the market,” Eickelbeck said. Though mortgage interest rates remain low, obtaining credit is difficult. “The lending has become a real issue for first-time homebuyers,” he said.

For developers, “Today the real key is to differentiate yourself” from the competition, said Eickelbeck. “The nice thing about the recession is that it got these wannabe builders out of the market”¦That really cleanses the field. We”™ve only got the more stable, reputable builders that are out there.” But a company still must distinguish itself from the well-capitalized survivors that remain.

Since 2006, AVR Homebuilders has done that by building its units to Energy Star standards. Seeing the growing attention to energy conservation and green buildings, “We made a decision we”™d rather be at the forefront of it than playing catch-up,” Eickelbeck said.

Though building to Energy Star program requirements is more costly, federal incentives subsidize one-third to one-half of those costs, he said. AVR Homebuilders does not add  premiums to buyers”™ prices for its Energy Star-rated homes.

“The return of it to me is really differentiation and a better product. I”™m providing more value. I want to put something in that homeowners can”™t do themselves.”

Federal EPA officials have calculated that owners of Energy Star homes can expect to save $200 to $400 annually on their utility bills. At AVR”™s Powell Cove Estates in Queens, condo owners see a 50 percent energy savings, Eickelbeck said.

“One of the challenges of the program is people believing it,” he said. Eickelbeck said he has tried to work with the New York State Energy Research and Development Authority, which administers the Energy Star program in the state, to develop a program that compares energy usage in homes of like size and design that meet standard building code requirements with those built to Energy Star standards. The effort has not been successful.

“People are somewhat skeptical, but I think that has diminished. I found the buyers that are coming in are more educated about it. They”™re more savvy about what the benefits are,” said Eickelbeck.

But the Energy Star program has become more costly for builders. As municipal building codes become more stringent and incorporate Energy Star standards, federal officials have raised program requirements, while at the same time gradually phasing out some financial incentives for companies, he said.

“It”™s actually become much more difficult to achieve an Energy Star rating today than it was five years ago,” said Eickelbeck. “What was Energy Star five years ago is now standard.”

That crystal award is increasingly weighted with costs for federal partners like AVR Homebuilders. “Frankly, it”™s really at a point where it”™s becoming difficult to do this,” he said.