Case Studies: Development

The Cascades, Virginia Beach, VA

The Cascades is an A+ community in the strongest submarket of the Hampton Roads market. In addition to 226 apartment units, the development includes a mixeduse component with 22,000 sq ft of restaurant and retail on the ground level. The property features finely appointed residences, upscale project amenities, and a convenient, accessible location. Residents of the property enjoy an abundance of upscale shopping, dining, and recreational amenities all conveniently nearby. The deal structure used for this transaction was a joint venture with the landowner.

Challenges

  • When Bonaventure put the property under contract, the existing approved plan was for a grandiose stacked mixed use design that was not financially feasible or leasable in our estimation.
  • Existing entitlements required 67,000 sq ft of retail in 6 different buildings. 11 of the 13 planned buildings had 12 units or less in them, which was an extremely inefficient design.
  • All the retail was designed to be small format shops without an anchor.
  • Bonaventure assumed a purchase contract that only had 6 months remaining before closing was required, and we needed to complete all our due diligence and modify the zoning for the property during that time.
  • The project was under design during the financial meltdown of 2008-2009. When we obtained building permits in early 2009, no banking institutions were lending money on commercially reasonable terms
  • The drainage ponds for the property were designed at the far end, under power lines, not used for any visual amenity.

Solutions

  • Bonaventure redesigned the site to go from 12 unit residential buildings and stacked mixed use buildings with concrete podiums to 3 story wood framed walk up buildings that were much more affordable to build and more appropriate for achievable rent levels.
  • We convinced the city to reduce retail requirements to 22,000 sq ft in just one building. In turn, we were able to increase density from 192 units to 226 units.
  • We converted the purchase contract to a JV arrangement with the landowner, which allowed flexibility with respect to time and financing.
  • We were able to secure a $33 million construction and permanent loan through HUD and start construction at a time where very few projects were able to break ground.
  • Moved the drainage ponds to a focal point and created an amenity which maximized water views.
  • Through a combination of the more practical design and good buyout of the construction contract, we saved $1M from our original development budget.