| Any city would love to have a neighborhood that looked like this. Notice that there are bikes and roller blades, but not a car in sight. |
The local Detroit papers are abuzz with a development project announced yesterday, but a closer look at the numbers makes me wonder if it is not doomed from the start.
300 low-rise apartments are planned for the riverfront area just east of downtown, just south of Jefferson and near the popular Riverwalk and Dequinder Cut recreation projects recently completed. Another 200 units are slated for Phase Two of the project. A St. Louis development company (McCormack Baron Salazar) rolled out the $55 million project yesterday, with federal and city incentives. Units are expected to rent for between $850 and $1700 per month.
Taking $1300/month as the average rental, those 500 units could be expected to return about 6% on the investment, assuming everything goes perfect and no above-average costs. But we know that insurance will be more than average and that there will be costs for extra security, lighting, etc. above and beyond the norm. Even that optimal 6% is lower than operators usually would want to see. I know there is supposed to also be some detail, but the drawings did not seem to have much retail projected, so I am not counting that for much.
So, unless the city and state are picking up at least a third of the cost, I can't see how the numbers work here. Maybe I am missing something, and I know the details are still very preliminary, but I am a little dubious about this project actually getting completed as announced.
You can check out the Detroit News for more about this.
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