The San Antonio Housing Trust Public Facility Corp. (PFC) recently purchased the bulk of the former Friedrich Air Conditioning Co. complex on East Commerce Street, a major step in the redevelopment of the long-derelict industrial site.
Construction of the $68.7 million Friedrich Lofts is expected to begin in the spring of 2021 and take 22-24 months to complete, said Pete Alanis, the Housing Trust's executive director. The trust is governed by a board composed of five City Council members.
The new complex will be composed of 347 apartments, half of which will be priced at market-rate and the other half for households earning 80% of the area median income (AMI) or less. Of those below-market-rate units, 14 will be reserved for people making 60% AMI or less.
[ Scroll down for a chart showing various AMI levels. ]
The Housing Trust PFC will lease the property to a development partnership that includes the trust, and also developer Provident Realty Advisors of Dallas and capital provider American South Real Estate Fund of Atlanta.
Provident is building the new lofts, while American South is providing $10.9 million in equity. The Housing Trust's involvement means the development will benefit from a full property tax exemption under state law.
The Housing Trust purchased the 4.04 acres from a group headed by developer John Miller of Dallas for $6.31 million on Aug. 7, Alanis said. The purchase was first reported by the San Antonio Business Journal.
Before construction begins, Provident will have to work with the Texas Commission on Environmental Quality on environmental remediation of the site, and with the Texas Historical Commission on the demolition of the old manufacturing plant.
Miller will continue to own the small cluster of buildings on the northeast corner of North Olive and East Commerce, on which the iconic "Friedrich Refrigerators" sign sits, for potential future development.
The project has received mostly praise from the near East Side communities of Dignowity Hill and Denver Heights, San Antonio Express-News Skyline columnist Madison Iszler wrote recently. It's also received some criticism for its pricey rents, especially for those reserved for people making below the area median income.
Friedrich Lofts rents
|Source: San Antonio Housing Trust; anticipated rents two years from now.|
In a previous interview, Alanis explained the rents at 60% and 80% AMI, or less, exceed the rent limits for below market-rate rents, established by the U.S. Department of Housing and Urban Development for the San Antonio region, in order to make the project work financially.
“It’s the deal that is going to finally allow this project to proceed, and we’re finally going to have the Friedrich done,” Alanis told the Heron in June. “Otherwise, it just wouldn’t have happened.”
[ For more on how rent limits work, read "Why some subsidized housing is beyond reach for many San Antonians." ]
» Address: 1617 E. Commerce St.
» Development partnership: Provident Realty Advisors (16.5% ownership; Dallas), San Antonio Housing Trust Public Facility Corp. (16.5% ownership; City of San Antonio nonprofit), American South Real Estate Fund (67% ownership; Atlanta)
» Property Owner: San Antonio Housing Trust; purchased from group headed by John Miller (Dallas) on Aug. 7, 2020, for $6.31 million
» Occupancy: N/A
» Rent or Buy: Rent
» Height: Four
» Land size: 4.04 acres
» Total units: 347
» Market rate: 173
» 80% AMI: 160
» 60% AMI: 14
» 30% AMI: N/A
» Student Units: N/A
» Section 8: Yes, will accept voucher
» Retail (s.f.): N/A
» Office (s.f.): N/A
» Parking: 771-space parking garage
» Construction start date: Second quarter 2021
» End date: Early 2023
» Architect: Architecture Demarest (Dallas)
» Cost: $68.7 million
» Investors & Financing: $10.9 million via American South Real Estate Fund; $54.8 million HUD 221(d)(4) loan via Greystone (New York)
» San Antonio Incentives: $2.29 million
» SAWS Fee Waivers: $500,000
» City Fee Waivers: $97,670
» City Loans: N/A
» Est. City Property Tax Rebate: N/A
» Other: $1.7 million Inner City TIRZ reimbursement
» Bexar County Incentives: N/A
» Texas incentives: Full property tax exemption via San Antonio Housing Trust Public Facility Corp. duration of 75-year lease beginning 2021. $61,622.39 owed in 2020. Expected 75-year lease.
» Federal incentives: N/A
» Other: N/A
» TOTAL PUBLIC SUBSIDY: $2.29 million (does not include tax exemption)
» Return on investment: 7% (anticipated)
The San Antonio Housing Trust Public Facility Corp.(PFC) board agrees to purchase of the property sooner than planned. Though the deal isn't final, the purchase now gives the Friedrich, which has sat derelict for decades after numerous attempts to rehab it, the best chance for success, local officials said.
The Housing Trust PFC board, chaired by District 3 Councilwoman Rebecca Viagran, approved the formation of a company to purchase the property now so that the environmental work and, ultimately, the demolition of the buildings can be completed before taking the project to HUD in March 2021 for final closing.
"We recognize (the HUD closing) is not going to happen until March," Jim Plummer, an attorney with Bracewell LLP who puts together local PFC deals, told the board. "However, HUD ... has to see TCEQ has approved the environmental and the state of Texas (historical commission) has approved the demolition plan."
The 347-unit Friedrich Lofts project at 1617 E. Commerce St. is being lead by Dallas developer Provident Realty Advisors in partnership with the Housing Trust PFC and Atlanta-based investor American South Real Estate Fund.
The Friedrich is located within the Dignowity Hill neighborhood, just north of the Denver Heights neighborhood—two of the fastest gentrifying communities in inner San Antonio.
The San Antonio Housing Trust PFC brings to the partnership a full property tax exemption afforded to governmental nonprofits (or PFCs) under state law in exchange for half the units priced for people making below the area median income, or AMI. This year the Bexar Appraisal District appraised the five-acre property at $2.1 million, and concludes $61,622.39 is owed in property taxes to local jurisdictions.
The American South Real Estate Fund, meanwhile, is contributing $10.9 million in cash.
Provident has applied for a $54.8 million U.S. Department of Housing and Urban Development (HUD) 221(d)(4) loan via Greystone of New York, but additional environmental assessments, such as ground water and soil testing, is being required by the Texas Commission on Environmental Quality (TCEQ). The Texas Historical Commission also has to approve the demolition of the buildings.
American South Real Estate Fund has agree to pay for the upfront costs of the environmental and demolition work, but the group only works with nonprofits, or public nonprofit, entities, thus the need for the San Antonio Housing Trust PFC to move on ownership now, Alanis said.
According to Alanis and Plummer, the board needed to approve the purchase of the property because the current sales contract, between Provident Realty Advisors and Dallas developer John Miller, who's owned the Friedrich for many years, is due to expire June 30. Miller plans to retain ownership of the buildings facing East Commerce Street. It's unclear what his plans are for those buildings.
Provident Realty Advisors will pay the San Antonio Housing Trust PFC a $350,000 fee at the imminent closing, and another $250,000 at the HUD closing in March, Alanis said.
During the meeting, District 9 Councilman John Courage said he supported the project, but called its financing convoluted. Council members Roberto Treviño (District 1), Adriana Rocha Garcia (District 4), and Shirley Gonzales (District 5) also serve on the S.A. Housing Trust PFC board.
"The city has tried five attempts to find a way to get the Friedrich rehabilitated," Plummer told the board. "It has been unsuccessful to date. So, yes, you have seen this project many times. I think we finally have a structure that's going to work. Yes, it's a convoluted structure ... because we are working to make sure you have no risk in an environmental remediation."
For its part, the American South Real Estate Fund will hold 67% ownership, while Provident Realty Advisors and the San Antonio Housing Trust PFC will have 16.5% ownership each when the apartments are built. Alanis acknowledged the large ownership stake by American South Real Estate Fund, but said the investment group was the only one Provident Realty Advisors could find for the Friedrich. Part of the delay has been finding an investor willing to commit to the Friedrich, Alanis said.
The project is also receiving $2.29 million in city incentives.
During the meeting, virtually all council members expressed concern that District 2 Councilwoman Jada Andrews-Sullivan, who's district encompasses the Friedrich complex, wasn't present at the meeting. The San Antonio Housing Trust PFC board is composed in a way that excludes the District 2 council member. Alanis told the board Andrews-Sullivan supports the Friedrich Lofts project.
Under a PFC development structure, the PFC owns the property to receive the property tax exemption and leases it to a partnership that includes the PFC. For more, scroll to the bottom of this post.
Setting It Straight: This section was updated to reflect the Friedrich complex being located inside Dignowity Hill.
Jan. 22, 2020
San Antonio Housing Trust PFC revises memorandum of understanding MOU with Provident Realty Advisors. Read the agenda item from that meeting.
Aug. 14, 2018
The Inner City Tax Increment Reinvestment Zone board voted to approve a $1.7 million reimbursement to the Friedrich Lofts project. For more info, read "Friedrich receives $1.7M incentive for mixed-income apartments"
Here are the latest area median income (AMI) levels for the greater San Antonio area (Bandera, Bexar, Comal, Guadalupe and Wilson counties), according to the U.S. Department of Housing and Urban Development. Want to know more about how AMI works? Click here.
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Here are the rent limits for most affordable apartments in housing properties in the San Antonio-New Braunfels region that received financing or subsidies from the U.S. Department of Housing and Urban Development. Want to more about how rent limits work? Click here.
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