Solstice in Lake Saint Louis, Missouri

Developers Bullish on Northwest Suburbs of St. Louis

by Channing Hamilton

The combination of sustained job and population growth has put St. Charles County in the “Show-Me State” on the map and served as a catalyst for multifamily development. Buoyed by the presence of several multinational companies such as Amazon, General Motors and MasterCard, the county is home to several thriving suburbs northwest of St. Louis and posted a nearly 15 percent increase in population from 2010 to 2022. The number of residents rose from 360,485 to an estimated 413,803 during that period, according to the U.S. Census Bureau.

St. Charles County’s population is expected to reach 470,000 by 2030, which if realized would be a 14 percent increase from 2022 population levels. Much of that growth has occurred within the “Golden Triangle,” an area roughly bounded by I-70 to the north, I-64/40 to the west and the Missouri River to the south. Cities within the Golden Triangle include St. Charles, St. Peters, O’Fallon, Lake St. Louis, Dardenne Prairie, Cottleville and Weldon Spring.

Engine of Employment

St. Charles County accounted for 44 percent of all new job growth in the St. Louis metro area between 2012 and 2022, according to the Economic Development Council (EDC) of St. Charles County. 

As of September 2023, the five largest for-profit employers in St. Charles County ranked by the number of full-time workers included: Amazon (5,041) in St. Peters; General Motors, (4,124) in Wentzville; MasterCard (3,450) in O’Fallon; Citigroup (1,858) in O’Fallon; and Boeing. The global aerospace company has an undisclosed number of workers in St. Charles County. (There were about 15,000 Boeing employees working across three facilities in the St. Louis region as of February 2023, according to the St. Louis Business Journal.) 

St. Charles County is also home to eight data centers on the High-Tech I-64/Highway 40 corridor, the largest concentration of information technology facilities in metro St. Louis, according to the EDC of St. Charles County. 

The October unemployment rate in St. Charles County was 2.8 percent compared with 3.4 percent for the St. Louis metro area. 

In light of these economic strengths, it’s easy to see why apartment developers are drawn to St. Charles County. “I would say the attributes of St. Charles County are the job and population growth potential, the great school districts and more breathing room. We are on the other side of the Missouri River, so there is a lot more space and ability to bring our developments online,” says Tom Kaiman, founder and president of Mia Rose Holdings based in Chesterfield, Missouri, a western suburb of St. Louis. 

St. Charles County abuts St. Louis County, Missouri, with the Missouri River serving as the dividing line as one heads west from St. Louis. “The ability to grow and expand is greater in St. Charles County because you’re not constricted by the river. St. Louis County is defined by the river, so it can’t grow any farther west, and it can’t grow any farther east because there’s the Mississippi River,” explains Kaiman. 

Focus on Select Markets

Mia Rose has delivered or is developing more than 2,000 units of luxury, Class A, suburban multifamily and mixed-use development communities throughout the St. Louis region, primarily in St. Charles County. In total, Mia Rose has over 3,000 units under development in four markets: St. Louis, Northwest Arkansas, Indianapolis and North Texas.

All 192 units of TWG’s Reserve at Spencer in St. Peters, Mo., will be reserved for renters who earn up to 60 percent of the area median income. The project is scheduled for completion in early 2025.

In November, Mia Rose opened 44 West Luxury Living in the St. Louis suburb of Valley Park, which is located in St. Louis County. The project features five buildings with one- and two-bedroom units along with a clubhouse. Three of the five buildings totaling 120 units are complete. The remaining two buildings totaling 84 units are slated for completion in January.

The two-bedroom units average 1,020 square feet while the one-bedroom floor plans are approximately 780 square feet. The monthly rent for a one-bedroom unit ranges from $1,450 to $1,510, according to the 44 West Luxury Living website. The two-bedroom units rent for $1,900 to $1,950.

The 3,800-square-foot clubhouse features a conference center, package concierge, specialty coffee bar, great room and fitness center. The outdoor amenities, which include a pool, sun deck and lounge with fire pits and grills, will open this spring. Additionally, a two-acre parcel of the 10-acre project site is slated for future commercial and retail space.

Mia Rose partnered with Benton Homebuilders to develop The Prairie, a luxury, multi-use community in Dardenne Prairie, Missouri. Midas Construction broke ground on the multiphase project at the corner of Bryan Road and Missouri Route 364 in the heart of St. Charles County in September 2021.

The 180-unit development included the construction of five, three-story luxury apartment buildings, consisting of 120 one-bedroom units and 60 two-bedroom units. All five buildings are now open. Benton Homebuilders constructed 60, 1,550-square-foot villas, each with three bedrooms, a full basement and a two-car garage.

The project also included the construction of a 3,000-square-foot retail building leased to Imo’s Pizza and gourmet cookie shop Twisted Sugar. Both shops opened in November 2022. The retail building is located on an outlot.

In January 2023, Mia Rose announced that it was expanding the $75 million apartment complex by adding a $13.5 million mixed-use building, according to the St. Louis Business Journal.

Construction of the 45,000-square-foot expansion, built on an outlot at the Prairie, began in February. The newly completed building includes 24 two-bedroom, two-bathroom apartments on the second and third floors above 15,000 square feet of retail space on the first floor.

Rents for this second phase of The Prairie range from $1,340 to $1,355 for a one-bedroom unit (751 square feet), and $1,700 to $1,790 for a two-bedroom unit (1,109 square feet), according to the property’s website.

Impact of Development Wave

The attractiveness of St. Charles County to developers is reflected in the data. For the 12-month period that ended in June 2023, the submarket’s apartment stock increased by 5.9 percent, according to Marcus & Millichap. To put that figure into context, the apartment stock for the entire St. Louis apartment market increased 1.6 percent during the same period.

Across the metro area, supply is currently outpacing demand by a wide margin. Developers delivered 1,881 units to the St. Louis apartment market through the first three quarters of 2023 versus absorption of 612 units, according to RealPage. The latest forecast from the data analytics and property management software firm calls for annual supply of 2,774 units in 2023 and 2,452 units in 2024.

“We’re seeing effectively a record number of units delivered in the St. Louis apartment market since we began tracking the market in the mid-1990s,” says Carl Whitaker, director of research and analysis for RealPage. “Generally speaking, we’re at a 30- to 40-year supply peak.”

But a wave of new supply in the St. Louis market is not the same as in a hot market like Nashville, Whitaker points out. The total number of units under construction in Nashville represents about 15 percent of existing inventory compared with 3.5 percent to 4 percent in St. Louis. “So yes, the St. Louis market is peaking, but it’s like looking at a hill versus looking at Mount Everest in terms of the peak level.”

Whitaker says that multifamily housing starts in the St. Louis market have already peaked. “Peak deliveries won’t happen for another year to two, but I think peak construction is pretty clearly in the rearview mirror.”

There were 4,146 units under construction in the third quarter of this year, down from a peak of 5,713 units in the third quarter of 2022. Construction activity is expected to diminish further because developers face a challenging debt-financing climate. The sharp run-up in interest rates over an 18-month period beginning in early 2022 also means that many projects today don’t pencil out for developers like they did previously.

As a result of the supply surge, the occupancy rate of the St Louis apartment market slipped from 96 percent in the third quarter of 2022 to 94.4 percent in the third quarter of this year, reports RealPage.

In its third-quarter update on the state of the St. Louis apartment market, Marcus & Millichap noted that the historically high volume of near-term supply additions will likely lead to an uptick in the vacancy rate.

“The impact of these new units will be most apparent in four submarkets — Central West End-Forest Park, Mid St. Louis County, St. Charles County and St. Louis City — making these areas most vulnerable to vacancy increases this year,” wrote Marcus & Millichap.

Not surprisingly, rent growth in the St. Louis apartment market has slowed due to the large number of new deliveries and an uptick in the vacancy rate. Marcus & Millichap forecasts an average effective rent of $1,280 at the end of 2023, up 5.2 percent on a year-over-year basis. By comparison, the average effective rent increased 7.6 percent in 2022 and 13.3 percent in 2021.

In Search of Equilibrium

Positive absorption occurs when the number of renters moving into apartments exceeds the number moving out. The St. Louis apartment market has been on a roller coaster ride in the past few years when it comes to move-ins and move-outs. After recording positive absorption of 4,241 units and new supply of 1,268 units in 2021, the St. Louis apartment market did a sharp about-face, the RealPage data shows. Negative absorption in 2022 totaled 1,074 units compared with new supply of 2,748 units.

“That big spike in absorption that you saw in 2021 was borrowing demand from the future,” explains Whitaker of RealPage. “It wasn’t like the St. Louis apartment market suddenly created more demand in one year and was going to run above historic norms in the future.”

Whitaker says one factor that contributed to the negative absorption in 2022 was a drop in U.S. consumer confidence amid high inflation and economic uncertainty. Nationally, the annual inflation rate hit a 40-year high of 9.1 percent in June 2022, but has steadily come down since then. By November of this year, the annual inflation had slowed to 3.1 percent.

The Mia Rose Strategy

Kaiman founded the company in 2014 and named it after his daughter Mia Rose, who is now 10 years old. The company’s development approach begins with finding the best possible sites in select growth markets, explains Kaiman.

“Once we’ve identified those sites, getting them entitled, zoned and approved is the next step. After we’ve gone through that process, we will then determine as we finalize our investment strategy whether it’s a long-term hold, or a merchant builder situation where the properties are built and sold. That ultimate strategy is about 50-50. We keep 50 percent of our assets on a longer-term basis, and then the other 50 percent of the assets are more of a build, fill and sell strategy.”

The Solstice, a 156-unit Class A apartment complex in St. Charles County’s Lake Saint Louis, is an example of Mia Rose’s merchant build strategy. Minneapolis-based Timberland Partners acquired the property in late October. The price was undisclosed, but the St. Louis Business Journal reports that the property sold for over $30 million. Mia Rose completed development of the property earlier in the year. The Solstice features 48 two-bedroom units and 108 one-bedroom units spread across five buildings.

The typical ground-up development project undertaken by Mia Rose includes about a year in the pre-development phase followed by 18 months of construction. Most of the company’s developments feature three-story walk-up apartments spread across multiple buildings. Each building may contain 30 to 40 units. That gives Mia Rose the flexibility of being able to open its buildings on a gradual basis.

Conversely, the developer of a 200-unit, high-rise building doesn’t have that option because all units need to open at once. The staggered apartment openings are part of the company’s strategy. “Continuing to do more of that helps with the lease-up and the interest carry,” says Kaiman.

Mia Rose Holdings recently opened 44 West Luxury Living in Valley Park, Mo. The contractor was Wright Construction, and the architect was Rosemann & Associates.

Luxurious and Affordable

Kaiman considers Mia Rose’s developments to be luxury, Class A assets, but relatively affordable. “The sites that we pick, the areas that we’re in, and the products that we deliver can still be afforded by most of the demographics in our area. That is something that really kind of sets us apart. We don’t build the Class A++, high-end amenities that are way over the top and that only 10 percent of the market can afford.”

The company’s vision from the beginning has been to offer high-quality amenities such as attractive clubhouses and resort-style pools in the common areas, but to spend most of the money on the units, says Kaiman.

Mia Rose offers soft-close cabinets, full-size washers and dryers, 9-foot ceilings. Every one of its units features a balcony or patio and provides storage space. Those are touches that set the developer’s units apart from the competition, Kaiman believes.

“I like to spend money on our units and our finishes. We get a lot of positive feedback from that. We really kind of blow a lot of people away when it comes to our finishes compared with the finishes of others. I don’t waste a million dollars on an over-the-top clubhouse or something of that nature.”

Family and Friends Investment Approach

Mia Rose doesn’t rely on institutional capital to launch its projects. Instead, it has embraced a family and friends investment model. Most of the investors are folks that Kaiman knows personally or are friends and family of Mia Rose employees. “Since we started family and friends in 2015, the whole goal was to regenerate that capital so it could be used in multiple projects,” explains Kaiman. The investors who have been with Mia Rose from Day One are playing with house money at this point, he believes. “What I mean by that is they have probably doubled their money — maybe even more than that — during the course of our history. And then they have redeployed that capital into the next deal, and the next deal.”

The advantage of this approach to investing is that the Mia Rose team is in touch daily with the investors, and there is a high level of trust among all parties involved, emphasizes Kaiman. “That group knows us, knows how we execute, knows what we’re very good at, and believes in our vision and investment strategy.”

The disadvantage of the friends and family approach is that it doesn’t allow a company to grow as fast as it might otherwise with the help of an institutional investor writing a $10 million check. But that slower growth trajectory suits Kaiman just fine. He says it’s only fitting that Mia Rose be asked time and again to prove itself in the “Show-Me State.”

“Come in, invest with us. Let us show you what we’re going to do,” says Kaiman of his business philosophy. “And after we’ve proven to you that we’re a good group to invest with, come stay on the ride with us and let’s do it over and over again.”

— By Matt Valley. This article originally appeared in the Nov/Dec issue of Midwest Multifamily & Affordable Housing Business.

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