The next time you're driving on Broadway and you approach Jones Avenue from either direction, imagine, in place of Mayor Ron Nirenberg's campaign headquarters, apartments rising five stories. They consume the width of the block, from Jones to 10th Street, and extend back another block to Avenue B. A glacier made of wood, stucco and brick assembled on a piece of land the size of Maverick Park across the street.
Broadway Jones, as it's called, will consist of 283 mixed-income units. Half of the units will be offered to people making less than the area median wage. The other half will be leased at market rate rents. The project will include 15,000-square-feet of retail on two floors. Restaurants, most likely. And it will add more residents to what is arguably San Antonio's hottest real estate submarket—River North.
It's easy to imagine what these apartments—what this area—will look like in five years: the vibrant, 24/7 neighborhood that city officials have sought through various housing incentives programs.
Broadway Jones is benefiting from three such programs.
It's hard to explain, however, the how this neighborhood is being built.
Broadway Jones, in particular, is a project by a labyrinthine development partnership that includes developer NRP Group, and a city-created nonprofit called the San Antonio Housing Trust Public Facility Corp., among other unknown partners. It's a relationship very few people fully understand, including the City Council members who make decisions on these projects.
This article is based on a Nov. 1 discussion by City Council members on these topics.
Some criticized Broadway Jones for what they called a lack of true affordability. They also debated whether a deeper level of affordability is possible given the obstacles of developing downtown. At times, the conversation touched on larger questions:
How much affordability can a city demand from developers in return for the incentives it provides?
Will those affordability demands slow the growth of the market the incentives are supposed to be fueling—all in the name of equity?
Is more affordable housing downtown realistic? Or, is it fantasy?
It's a discussion San Antonio has been having ever since Nirenberg formed his Mayor's Housing Policy Task Force in October of last year, and after he put a moratorium on the city's Center City Housing Incentives Policy in December 2017.
Usually, a housing incentive under $1 million wouldn't produce much discourse from the City Council. It would pass on the consent agenda with no discussion, or a Council member would briefly highlight it for the record. Barely a blip.
The matter of approving a $680,000 reimbursement toward NRP Group's $55.9 million, five-story Broadway Jones project, however, was not business as usual.
In an 8-1 vote on Nov. 1, the Council approved the incentive for Broadway Jones, but it was not without a vigorous debate.
"I'm glad we're getting some level of affordability, even if I don't agree with the definition of affordable," District 4 Councilman Rey Saldaña told his colleagues.
The Council members also tried to get a clearer picture of what exactly it was they were incentivizing—because some, admittedly, didn't fully understand how Broadway Jones was put together.
In short, Broadway Jones is being developed by a partnership group that involves NRP Group, one of San Antonio's most active developers, and a city-created nonprofit called the San Antonio Housing Trust Public Facility Corporation (PFC), which is operated by Council members who represent Districts 1 through 5.
The partnership is exempt from paying all property taxes because the PFC also owns the property. The group partners with a developer—in this case, NRP Group—to build the housing that includes affordable units.
This type of agreement first produced the Cevallos Lofts in Southtown, and the newer Baldwin apartments on the near East Side, to name a few.
Specifically, half of the units at Broadway Jones will be offered to households making 80 percent of the area median income (AMI), which in the greater San Antonio area (including New Braunfels) is $53,440 for a family of four, according to the U.S. Department of Housing and Urban Development. The average rent for these units—all one-bedrooms—will be $1,128. GIVE SOME CONTEXT!!! SPELL OUT FOR THE READER
Some on the Council, particularly Saldaña and District 9 Councilman John Courage asked city staff to explore ways to include units offered to families making 60 percent AMI, or $40,800 for a family of four.
Before we explore these questions, you first have to understand how these PFC projects are put together. It's extremely complex, but let's walk through it together.
The PFC, which, again, is operated by Council members, owns the land and everything that's built on the land.
A partnership is formed that builds and manages the apartments. The PFC leases the building to the partnership for 75 years. During that time, the partnership is exempt from paying any property taxes. At the end of the 75 years, the PFC owns the entire development.
THIS IS HOW THE PFC MAKES MONEY ...
The PFC, in the case of Broadway Jones, owns 15 percent of the partnership. For that, they receive 15 percent of the rent revenue stream. The PFC also receives an annual administrative fee from the partnership, which is $20,000 for Broadway Jones, according to Veronica Soto, director of the city's Neighborhood and Housing Services Department.
In Broadway Jones, NRP Group is also an equity partner, though it's unknown how many millions of dollars it's putting into the project. It's also unknown what other entities, such as investment trusts or individuals, comprise the partnership. A request to NRP Group for the complete partnership list was not answered.
Broadway Jones' lender, nor the rate of return on investment (the profit) is also unknown. I requested these figures from NRP Group and the PFC, but was either denied or ignored.
In return for the tax exemption, the partnership agrees to lease half of the units to households making 80 percent of the area median income, which in San Antonio is $53,440 for a family of four. Just like when you apply to live at an apartment, and you have to prove you make a certain amount of money—but here, lower income households are allowed to rent these apartments. However, the partnership then restricts the rent to 30 to 35 percent of the family's income.
SOTO so even thogh to quality you have to below 80%,
once you're in the building, your rent can not go as high as that 35% of your income
[ Editor's note: The Mayor's Housing Task Force uses an AMI of $49,000 (just San Antonio)—a 2016 figure from the U.S. Census American Community Survey 1-year estimate. Broadway Jones uses the HUD definition of $66,800, which includes New Braunfels. ]
Pfc literally could sell the whole thing, lock stock and barrell?
they can sell its 15%
They cannot back out of the lease
If the project lost its affordability component
Which is very much theoretical
If 10 years from now there’s a different owner, and they … ???
That property would be subject to full property taxes,
And the pfc would still own it
And the pfc would still hae the right to own 15%
??? legally they could, but nobody's going to buy a minority interest in that partnership
if the project is sold, we get a share of the sales proceeds
we can convert that 15% to a rental stream, we can say, no we don't want sales proceeds, we want a longterm rental stream
OTHER QUESTIONS SENT TO SHEFFIELD
In the Friedrich Lofts deal on the East Side, the PFC partnered with Dallas developer Provident Realty Advisors. Of the 347 units on the site of the former refrigerating plant, 14 will be offered to households making 60 percent AMI. HOW MANY TO 80% AMI???
In a meeting in late September, the PFC, which is chaired by District 3 Councilwoman Rebecca Viagran, voted to "buy down" rents by applying the $250,000 closing fee and a $25,000 annual administrative fee Provident Realty Advisors would have to pay, and reinvest those payments into the project to be able to offer lower rents.
Jim Plummer, an attorney with the law firm Bracewell LLP, who represents the PFC in these deals, explained how this all works using a hypothetical rent structure.
"If rent for an 80 percent (AMI) person was $1,000, then the rent for a 60 percent AMI probably has to be $800," Plummer said in an interview. "We're agreeing that we will pay into the project the $200 differential a month and we're going to use the fees we made from the project to do that."
At the PFC meeting, Plummer told Council members they could use future revenue generated from rents to buy down more rents to be able to offer 60 percent AMI rents than just the 14.
The one-time $250,000 closing fee and the $25,000 annual administrative fee over the 75-year lease add up to $2.1 million. In a recent interview Veronica Soto, director WHAT, said she considers the "buying down" of rents an incentive for the developer. In this case, the developer, Provident Realty Advisors, is essentially paying itself in exchange for offering 14 units to households making 60 percent AMI.
Plummer nor Sheffield responded to follow-up questions on this point. But Soto did. I asked her if this method of "buying down" rents is essentially the developer paying themselves.
"The developer is paying themselves, but the beneficiary is the person who rents at $600 as opposed to $800."
??????This method, however, was not presented as an option for Broadway Jones. During the Council meeting two weeks ago, District 7 Councilwoman Ana Sandoval asked if it was too late to go back and ask for lower rents.
??? ??? ??? GET RESPONSE TO SANDOVAL'S QUESTION Likely the reason is that the Friedrich project is newer and the details of the rent-structure was just put into place, based on Plummer's recent presentation to the PFC board. Broadway Jones has been going on for nearly two years, Assistant City Manager Lori Houston said.
PFC projects such as the Friedrich Lofts—which are replacing the decades-long vacant former Friedrich refrigerator factory—are said to be economic boosters in long-neglected neighborhoods.
But the Broadway corridor is far from being ignored. It's the complete opposite of being ignored.
In fact, a city-funded assessment of another incentive program, called the Center City Housing Incentives Program, concluded that these types of projects—wood-framed, five-story apartment buildings along downtown's outskirts—no longer required incentives to be successful, because the rents they're able to command offer a large enough revenue stream that they are profitable without incentives.
The project at Broadway and Jones, however, is unique in that it has environmental issues and additional utility work specific to the site that have added cost to the project, Houston told City Council members.
After the vote, Travis Sheffield, NRP Group's vice president of development, explained.
"The project itself would be challenging to exist without the PFC partnership and the incentives," Sheffield said. "You would need significantly higher rents. Now there are new products in the area on the river that are really pushing rents that haven't quite been proven. I can't say if (Broadway Jones) would exist on the same timeline. It might exist five years later. It's possible. (The rents) would have to be very expensive."
During the discussion, Saldaña asked if the city would do it over again, could they have squeezed in more affordable units into Broadway Jones.
"If the city had an additional $1.8 million," the developer could make 10 percent of the total units at 60 percent AMI, Assistant City Manager Lori Houston said.
The $1.8 million Houston referred to was the gap NRP Group explained it needed in order to make the project more affordable.
this project would not happen without city incentives
NRP would not be able to do this project
if hthe city had an additional 1.85 in cash
they could make that 10 percent at 60%
the inner city incentive fund, we don't have that cash
we receive $2M annually
we do not have that pot of money to help with that affordability.
Saldaña stresses the need for more affordability in projects like Broadway Jones, which has 80% area median income rents. He wants 60% in the future.
He said he understood that Broadway Jones was well underway before the mayor launched his housing task force, and his moratorium on the CCHIP, and therefore the subsequent conversation about affordability.
"This was a project was maybe a year and a half in the making, but we are changing the way we do business," Saldaña said.
For Broadway Jones, the average rent offered to people making 80 percent AMI is $1,128; the average market rate rent will be $1,966, according to figures provided to NRP Group.
MUSEUM REACH LOFTS
looking to see how they can create a tier of body??? system /// that is a path we are lokoing at
9 percent tax credit
we are looking at one right now
Museum Reach Lofts
but the tax credit provides 9 percent of the project cost annuallly for a 10 year period
the city incenties help with that project as well
it's a satcking of incenties
the CCHIP when aprtnered with PFC or a tax credit project canhelp with that affordability
GET CCHIP QUOTE FROM L HOUSTON
But Houston broke down the reality the city of San Antonio and developers are pushing.
"60% is not possible without buying down rents, or without a 9 percent."
What works for the people providing the equity, the investors. And what works for the city of San Antonio. In a way, it is not as of right, but a negotiation. Unlike the CCHIP. There isn't a magic ROI. Every one is different. Every one is specific to the investors involved. And the lenders.
One person who ripped into Broadway Jones, and who was the lone dissenting vote, was Courage. "We don't believe 80 percent of the county-wide AMI reflects the 80 percent (AMI) of people who live in the city," he said of other Council members, and alluding to the difference in AMIs.
"I think we've heard concern from several Council people about the fact that affordability is very questionable, when we hear that it’s only affordable for an individual or maybe a married couple who’s at the very top of what we consider affordable income."
District 1 Councilman Robert Treviño, who represents downtown, painted a more realistic picture. He said there are factors that limit the affordability, alluding to fluctuating land prices, and problems inherent with specific pieces of land—in the case of Broadway Jones, they had to do with environmental concerns and utility work.
"I certainly agree with Councilman Saldaña that we need to look for ways to find affordability in these projects," Treviño said. "I just think we can also be thoughtful of where that location is. One location is not necessarily equal to another."
Sandoval asked whether Broadway Jones is designed to serve families, given that the affordable units are only offered in one-bed rooms. "The development as a whole is not necessarily structured to serve full-size families."—@NRPGroup's Travis Sheffield says
"If we're going to put incentives... it's got to have something for the families, too. You quoted it as 'the best development in the city' ... that a family can not live in." @GregBrockhouse tells @NRPGroup's Sheffield about BroadwayJones on limit of affordable units to only 1BRs
sandoval "We likely don't expect to see families living in the affordable units?"
"The development as a whole is not necessarily structured to serve full size families. You're correct."
Other PFC development agreements are structured that way.
young professional, typically younger ... this is a creative flow partnership ... for folks ...
in a true top of the line quality apartment,
"I could be biased, but I feel like it will be the nicest product in all of San Antonio," Sheffield said.
"Right. It sounds like you could have saved yourself 2.6 million if you didn't make it so nice, and maybe have found that gap."
there is a balance there
we have the market rate units, we're actually a fianncail patner with the PFC, it's in the city's
what's the estimate on that
????????since we are a 501c3
you quoted it as the best dev in the citiy that a family can not live in
That is a problem. So they cannot have access to the best developed unit.
I’m not so sure that’s the target audience I would want to incent.
Editor's Note: We'll report more on the Friedrich Lofts project at a later time. Honestly, we're still trying to figure it out, so that we can produce a clear article on how it works.
two sets of incentives, but Broadway Jones is benefiting from both
although the PFC has never been described as an incentive, who is receiving the benefit?
it's also up to the developer. or the equity provider. or the banks??? how do those conversations go
PFC is a negotiation
Soto looking at more insight into the projects
"I just want to say, we're changing the course of business," Saldaña said. "I do think we have to start holding the line on certain items."
It's flanked by Broadway, which is due for $40 million in upgrades from the current bond program, and the Museum Reach segment of the San Antonio River, which received its millions of dollars in improvements six years ago. Apartments continue to go up along the river and Broadway. And now, office space is being built, as well.???
saldana began by questioning
overhead power, street improvements,
that's what tirz dollars go toward
we're saying that's part of a larger pool
timetable, other details of the project
2.75 acres. A monolith.