By Tim J. Randall
With a stable of projects across the country bearing best of breed names such as Walgreens, Kroger, Safeway, Wal-Mart, Chase, Wells Fargo, McDonald’s and Burger King, Evergreen Development management could have easily ignored in-house lawyer Jason Donkersley. To the firm’s benefit in 2013 and beyond, they listened.
Donkersley has never been solely content in the traditional role of attorney. From the start of his legal career in the mid-1990s, he has been a hybrid of lawyer and business person. It started at Meyers, Taber & Meyers, P.C., at which two senior partners, Donald D. Meyers and Donald L. Meyers, were also real estate developers. Their companies were among the firm’s biggest clients, so Donkersley learned to be both a lawyer and developer.
After a stint at Mariscal Weeks, now Dickinson Wright/Mariscal Weeks, Donkersley found himself in 2006 at Evergreen as the firm’s chief counsel. In 2010 he parlayed his expertise into a developmental shift for the organization.
In the depths of the Great Recession, Donkersley began advocating for the firm to expand into the multifamily space. Evergreen had traditionally developed single- and multi-tenant retail properties and acted as master developer for single-family housing communities. During 2009 and 2010, Donkersley and colleague Clay Toombs built the case for multifamily.
“Evergreen is fundamentally a conservative company, and this move was different than anything the firm had previously done, so it was a major change,” Donkersley says.
The multifamily space held a unique proposition for Evergreen. Investor demand for multifamily product was high. Resident demand for apartment housing looked to increase based on demographics and the eventual recovery of the economy. However, development had ceased and the market was not prepared to supply new units to meet this future demand.
While the underlying fundamentals for an Evergreen expansion into multifamily were present, the practical aspects of such an operation needed to be vetted.
The Right Place
As with all avenues of commercial real estate, but particularly multifamily, it is not enough to want to be in the arena. More important is the question of where to specifically find your niche. Evergreen management was decidedly on board and charged Donkersley with building a platform and finding the ideal project that fit into the company’s philosophy, culture and approach.
“It was not our intention to initially build garden style apartments,” Donkersley says.
The firm’s desire to expand in three markets over time – Phoenix, Denver and southern California – drove that decision. Denver and southern California were being defined by high density podium or wrap structured parking models. This type of multifamily structure is consistent across metropolitan areas, allowing for a density in excess of 60 units per acre, and, according to a recent NAHB Builders’ show roundtable, the key product determinant becomes the parking solution.
“We knew we would have to learn to develop podiums and wraps in Denver and southern California, and it didn’t make sense to further complicate things by developing a different product type in Phoenix,” says Donkersley. “We did not want to develop a Mark-Taylor style product. They are phenomenal at what they do, and candidly we did not want to compete with them in their backyard and have to do it better.”
Additional factors guided Evergreen’s decision. From a sustainability perspective, the firm was interested in infill locations over suburban sites. Furthermore, obtaining equity for a suburban development project in Phoenix by a first-time multifamily developer was, according to Donkersley, “nearly impossible” in 2010.
Evergreen knew it needed an education in transferring its significant commercial development experience to the multifamily sector, and it did not want to do so via trial and error. It also knew many in the marketplace thought it would not be able to complete the transition successfully. All these elements led the firm to eschew traditional multifamily partnerships for firms entering the market. Instead, Evergreen opted for the guidance of Dan Tilton, a 27-year expert in multifamily development with notable projects including the Alexan Scottsdale Civic Center and Alexan at Frank Lloyd Wright, through Trammell Crow Development, and Grigio Tempe Town Lake and Grigio Metro through Gray Development. Tilton guided Evergreen through the team’s first project, while simultaneously providing the education for Evergreen personnel to handle future builds on their own.
Donkersley credits Tilton for Evergreen’s early success.
“Dan Tilton was invaluable as a consultant, teacher, mentor and friend,” he says. “We could not have done this without him.”
The significant work of discussion, planning and preparation was finalized with the 2011 acquisition of land in Tempe located near Tempe Town Lake, Metro light rail and Arizona State University’s Tempe campus as Evergreen’s first development site. This site would become The Argo at Town Lake, a 328-unit podium style apartment community.
As often happens in new ventures, the results are not quite what the initial intentions were. With everything lined up for building permits to be pulled, Lennar Multifamily made a bid for the shovel-ready project, and in May Evergreen sold the 5.3-acre parcel of land for $13.5 million ($58.19 per square foot).
The Next Step
Since creating its multifamily platform, Evergreen Development has hired several multifamily development professionals, including Matt Evans in Phoenix (Trillium, PB Bell), and created a pipeline of multifamily initiatives. With three projects in Denver and one in Phoenix at 28th Street and Indian School Road, the firm expects 2014 ground breakings and has $135 million in volume.
“Multifamily will represent a major portion of Evergreen’s business for years to come,” Donkersley says. “Evergreen is not arbitraging a short-term market opportunity; we are in this space to stay.”
As for other locales, Evergreen is looking at Los Angeles but really sees the Denver market as an area of strong growth. Having built Evergreen’s multifamily platform, Donkersley has transitioned development leadership to Jeff Wikstrom so Donkersley can focus on the equity side of the house. In this capacity, he can work with Evergreen’s investment partners and keep an eye on such issues as GSE multifamily financing reductions of 10 percent in 2013.