LocalConstruct aims to revamp Downtown Boise through housing

Six years ago, Mike Brown and Casey Lynch stood on Downtown Boise’s 8th Street and wondered: Why don’t more people live here?

Downtown seemed to have everything that a growing percentage of Americans wanted in a place to live.

“I mean, there’s all kinds of jobs. There’s a million coffee shops and hair salons and restaurants, and there’s an active street life,” says Brown, who founded the Los Angeles-based development company LocalConstruct with Lynch in 2008.

Casey Lynch, left, and Mike Brown have made their mark in Boise.

Provided by LocalConstruct

But in 2011, fewer than 4,000 people lived in Downtown’s scattered apartment and condominium buildings and houses. On a typical weekday afternoon, most Downtown workers got in their cars and put the city in the rearview mirror.

Brown and Lynch saw an opportunity. They thought Boiseans would trade ample floor space and vaulted ceilings in the suburbs for smaller, high-end Downtown apartments that offered amenities like gyms, a dog-washing station and concierge-style property management. No one was building that kind of housing here.

Today, Lynch and Brown are two of the most important names on the list of people shaping Downtown Boise’s future. Largely, that’s because they’ve been right so far about Downtown housing.

The Owyhee, formerly an iconic Downtown hotel, re-opened in July 2014 after years of renovations. In addition to 60,000 square feet of office space, The Owyhee has 36 apartments. Their smaller square footage and high rents tested developers Mike Brown’s and Casey Lynch’s theory that Boise could support this style of housing.

Katherine Jones Idaho Statesman file photo

In July 2014,Lynch, Brown and a local partner, Boise developer Clay Carley, opened The Owyhee, a remake of the historic Owyhee Plaza Hotel on the southwest corner of Main and 11th streets. It has 36 apartments and 60,000 square feet of office space. Then, rents ranged from $700 for a studio to $1,240 for a one-bedroom with a view of the Boise Foothills.

Three years ago, that was the top of the market, exceeding $1 per square foot per month. Today, LocalConstruct expects to charge more than $2 per square foot for some of its new apartments.

Lynch says there’s no reason to believe the market for LocalConstruct’s product — or housing in general — will cool. He and Brown point to nationwide demographics, which indicate that baby boomers (ages 53-71) and millennials (ages 20-36)account for almost half the nation’s population.

And they’re the groups seeking the kinds of apartments that are LocalConstruct’s specialty — smaller, efficient and close to everything.

Boise floated to the top

From their early days together, Lynch said, he and Brown anticipated that people would move out of high-cost coastal areas of California, Oregon and Washington in search of “more affordable, smaller cities that offer high quality of life and strong labor markets.”

Downtown Boise boasts 18 coffee shops, 53 bars and more than 100 restaurants, according to the Downtown Boise Association

Starting in the winter of 2010-11, Brown and Lynch combed through 40 western U.S. markets. They looked for good weather, low unemployment rates, the presence of a university, accessible natural amenities, and what they call the “coffee-shop index” — cool things to do.

“Boise’s Downtown has the infrastructure,” Lynch says. “It has charming older buildings. It has the presence of a lot of jobs. It has good road infrastructure and utilities.

(Boise) has all kinds of inherent advantages that you don’t necessarily find in other small cities.

Casey Lynch of LocalConstruct

“The one thing it didn’t have was housing.”

Business school to Boise

Brown, 38, grew up in Manhattan and later worked in Colorado. Lynch, 37, grew up in Sun Valley and worked for a while on the East Coast. They met in 2007 when they were attending UCLA’s MBA program.

In 2008, with financial markets wobbly, some commercial real estate professionals advised them: Get into the business now and take advantage of cheap property and construction bids.

At first, they bought single-family homes in the Los Angeles area and converted them to rentals. Later, they later renovated nearly century-old apartment buildings in urban neighborhoods such as Echo Park and East Hollywood that had decayed for decades as residents fled to the suburbs. Today, Lynch said, those neighborhoods are some of the most sought-after in Los Angeles.

Now Brown and Lynch buy land and build their own projects.

As LocalConstruct grew, it started competing with bigger developers with deeper pockets on their home turf. That led Brown and Lynch to seek new markets.

“In Los Angeles, we go to build a 60-unit building, we might compete against a publicly traded real estate company,” Brown says. “Those companies, by and large, cannot enter a market the size of Boise — certainly where it was in its evolution five, six years ago.”

Big developers look for larger, shorter-term investments than the kind that LocalConstruct specializes in, which are a better fit for the Boise market, Lynch says.

Instead of investor-driven companies, long-held local family-run businesses own much of Downtown’s residential real estate — Owyhee partner Carley’s family-owned Old Boise, LLC, for example.

That is conducive to LocalConstruct’s philosophy.

We invest for the long term.

Mike Brown of LocalConstruct

“And we’re young and nimble and, particularly when we went into Boise, we were still pretty small,” Brown says.

LocalConstruct still owns property in Los Angeles, and now has added holdings in Denver, Missoula and Colorado Springs. And it is still acquiring real estate in the Treasure Valley.

“We have a robust land pipeline in Boise and we’ll continue to bring projects to market every year or two — and then see how things develop,” Brown says. “We want to be part of that good energy in Boise and help the city evolve in a good way.”

LocalConstruct’s Watercooler Apartments, 1401 W. Idaho St., Boise, will feature a mural by Portland artist David Carmak Lewis on the building’s west side. It is the company’s first public art project in Boise, says Mike Brown. The company worked with Boise’s Planning and Design Services and the Boise Department of Arts and History on the project.

Katherine Jones kjones@idahostatesman.com

More to come

In September 2012, Brown and Lynch bought a 1.8-acre dirt lot between 15th, 16th, Bannock and Idaho streets on the edge of Downtown Boise’s core. It was their first investment here. The land remains undeveloped as LocalConstruct waits for the right moment to build.

Meanwhile, the company has taken on several other projects. The Owyhee and the Watercooler, a 37-unit apartment complex with space for a retail shop at Idaho and 14th streets, are complete. The company hopes to finish The Fowler, a 159-unit apartment building on the northwest corner of Fifth and Myrtle streets, in November.

LocalConstruct has bought and renovated other apartment complexes, including the 300-unit Edgewater Apartments on the southwest corner of State Street and Collister Drive. Lynch and Brown bought, renovated and later sold a complex on Chinden Boulevard. They have a planned mixed residential, retail and parking project on the southeast corner of Whitewater Park Boulevard and Main Street that would include a mix of residential, retail and parking space.

The Chinden sale was an exception, Lynch says. He and Brown look to build or acquire durable buildings in central locations and keep them for at least 10 years. Most of their Boise holdings fit that model, Lynch said.

Boise Downtown dwellers opt for smaller living spaces to be closer to the nightlife, restaurants, shopping and more. This 700-square-foot one bedroom is in The Owyhee, a historic hotel that LocalConstruct and Boise-based developer Clay Carley converted to high-end apartments in 2014.

Darin Oswald Idaho Statesman file photo

Smaller and closer

The apartments LocalConstruct builds are about 15-20 percent smaller than typical Boise apartments. In The Owyhee, Watercooler and The Fowler, apartments range from 450 square feet for a studio to 1,084 square feet for a three-bedroom. Rents across the the LocalConstruct portfolio range from more than $1,000 to $1,850.

A lot of people are willing to sacrifice space for more amenities, access to public areas and activities, Lynch says.

David Wali,a hotelier, commercial landlord and executive vice president of Downtown developer Gardner Co., says that offering people a low-maintenance lifestyle is good for business.

“There’s a lot to love about not having a yard,” Wali says. “And we have such a great parks and river system within walking distance of our Downtown that you can do an awful lot of additional living if you’re not having to mow, fertilize and water.”

Carley says Brown and Lynch’s out-of-town perspective enabled them to see the Boise market in ways many local developers haven’t.

“They’ve seen projects in denser markets succeed that, at that time, most developers (in Boise) looked at and said, ‘I’d never do that. It’s not going to work,’” Carley says. “And it does.”

Before partnering with LocalConstruct, Carley looked for a local partner “who had a real strong sense of community and what’s right for Boise, and not just economics,” he says. “But I couldn’t find a local partner. The risk was too great for everyone I spoke with.”

The Fowler, under construction on the corner of Myrtle and 5th streets, will test Boise’s market for high-end urban rental apartments. The 160-unit building will offer residents amenities like digital package locker system, a top-notch gym, a dog-washing station and a car share program, says developer Casey Lynch.

Katherine Jones kjones@idahostatesman.com

The Fowler precedent

The Owyhee was an experiment. Lynch and Brown wanted to prove that the high-end urban rental concept could work in Boise.

To the extent a 36-apartment project can do that, they have succeeded. Since opening in the summer of 2014, Lynch said, the apartments have been virtually full, and LocalConstruct has continued raising rents. As expected, the high-rent, high-service Downtown lifestyle has attracted millennials and baby boomers alike, Lynch says.

The real test, though, is The Fowler.

It’s named for one of the three 1890s-era houses that once inhabited the land where it sits. LocalConstruct donated the homes to anyone who wanted to relocate them. The new five story building of apartments atop a 190-space parking garage could be a game-changer.

“We haven’t really seen that type of development in this market until The Fowler,” Wali says. “If The Fowler is successful, it will spur a series of projects like it.”

Wali says Gardner, a Salt Lake City-based company that builds and owns commercial projects, wants LocalConstruct to succeed. More people living Downtown makes it more vibrant — and profitable.

Gardner built Eighth & Main, Idaho’s tallest building; City Center Plaza, a complex that includes office, retail, convention and parking space on The Grove Plaza; and Pioneer Crossing, a project under construction that will include a hotel, office building and parking garage on two blocks bounded by 11th, 13th, Myrtle and Front streets just west of the J.R. Simplot Co.’s new headquarters.

“From a Gardner standpoint, we have seen a need for housing Downtown for quite a while,” Wali said. “We could probably build out another couple thousand (housing) units Downtown, and it would be of great benefit to all the restaurants, office buildings and retail spaces within the Downtown.”

Financing is a big hurdle for new project types like The Fowler. If demand is softer than Brown and Lynch expect, it might take years for banks and investors to come around, he said.

“Banks only finance what was successful,”Wali said. “They don’t finance what might be successful. If The Fowler is successful, then the lender is going to knock at the door of Casey and Mike and say, ‘Hey, when are you going to do your next one?’ The only thing a banker wants more than to get paid back is to make the next loan.”

Local support

Brown and Lynch say Boise’s future looks as strong today as it did in 2011.

They credit City Hall, as well as Capital City Development Corp., Boise’s urban renewal agency, run by a volunteer board.

“You’ve got some very squared-away, high-quality private citizens volunteering to undertake those often thankless duties,” Brown said. “And by and large, they really do have the best interests of the city in mind. They want to see their city thrive over the long term.

“A lot of other places where we work, you’re just dealing with politicians. There’s very little leadership. There’s just a knee-jerk response to what they think is going to get them elected the next time.”

Planners and elected officials at City Hall, like Brown and Lynch, believe in high-density development. Concentrating people in smaller spaces concentrates services and infrastructure, reducing long-term costs and each person’s environmental impact.

“The problem is it costs more money to build higher-density buildings in the short term,” Lynch said. “You’re dealing with more-expensive construction types. You’re dealing with providing structured parking. You’re dealing with more-expensive land.”

CCDC has helped reduce costs by paying for things like streetscape improvements and splitting the cost of parking garages.

“And that’s critical,” Brown said. “Without their help, the projects Downtown don’t work, because the people who are building three or four miles out on State Street or in Meridian or Eagle, who are building a cheaper typology with surface parking lots, they’re going to beat you on price.”