Apartments Bring Affordable Top Design to Pricey San Jose
At a time when public-private partnerships can be instrumental in expanding financing opportunities for multifamily development, Almaden Apartments in San Jose, Calif., an NAHB Multifamily Pillars of the Industry award finalist for the Most Creative Financing of an Affordable Apartment Community, took an unconventional financing path to develop a 100% affordable apartment community in one of the nation's most expensive housing markets.
Developed by MacFarlane Costa Housing Partners, this 226-unit family apartment community provides high-quality housing to working households with income at 50% to 60% of area median. The community includes one-, two- and three-bedroom apartments with monthly rents ranging from $952 to $1,586. Comparable market-rate rents in the area average from $2,400 to more than $2,700.
The success of the project was based on close public and private partnerships involving the city, the development firm and nonprofit partners. A concerted effort by the various investors in the development avoided the delays that have become all too common in today’s badly weakened financial marketplace.
The effort from each investor thwarted delays and obstacles stemming from financing challenges and changing market conditions, although the development team had to bide its time until an improvement in land values and other costs made construction feasible.
The strategically layered financing plan included these sources:
- Predevelopment Loan (provided by the developer), $27.6 million
- Bridge Loan, $8 million
- Land Loan (all of the above carried for six years from initial land acquisition in 2001)
- Tax-Exempt Bonds (exemption from project bonding limit required), $31.3 million
- 4% Tax Credit Equity, $20 million
- City of San Jose, $13.8 million
- Developer Note, $2.3 million
- Developer Loan to Partnership, $4.9 million
Representing a significant redevelopment effort on the part of the city, the community was built on five acres of land that were previously used for industrial and commercial purposes and required extensive environmental remediation. The city of San Jose was a major investor, and was sold on the project’s proposal for 100% affordability while maintaining condo-level design.
Almaden Apartments experienced one of the fastest lease-ups in market history — all of the units were leased in two months time.
To further bring a sense of community to this previously blighted area, the project donated land to the city for a neighborhood park adjoining the property.
The community features a clubhouse, computer learning center with free on-site computer classes, fitness and business centers, pool and spa, laundry rooms and ample parking. Public transit and a light rail station are nearby, as well as schools and recreational facilities.
The project was designed to exceed market-rate standards, featuring classic contemporary garden-style architecture, with below-podium secured parking, while still appearing to be built on grade from all exterior views.
For more information on the Pillars of the Industry awards and multifamily resources available from NAHB, e-mail Ann Marie Moriarty, or call her at 800-368-5242 x8350.