San Diego Developer Begins Its Largest Project
Wakeland Housing and Development Corp. is building Atmosphere, a 205-unit affordable housing development in downtown San Diego. The project replaces a failed condo deal that had been planned for the site by another firm. (Rendering courtesy of Joseph Wong Design Associates.)
by Donna Kimura
Affordable Housing Finance
March 26th, 2015
A vacant downtown lot will be filled by a major new affordable housing development in San Diego.
Wakeland Housing and Development Corp. broke ground this week on Atmosphere, a 12-story building that will bring more than 200 affordable units to one of the nation’s priciest housing markets.
The approximately $79 million project is an important one for San Diego, literally filling a hole left by a failed condo deal years ago. Atmosphere is the first development approved as part of the city’s Affordable Housing Master Plan.
For Wakeland, a nonprofit that has built a portfolio of nearly 6,000 homes, the project is the developer’s largest to date. It’s also significant for other reasons.
“We have been getting more and more into special-needs housing,” says Ken Sauder, Wakeland president and CEO. “This is a continuation of that.”
The development will address the need for permanent supportive housing by designating 51 units for residents with special needs.
“Atmosphere will be an important addition to the national Housing First model for addressing homelessness,” said Richard C. Gentry, president and CEO of the San Diego Housing Commission (SDHC), in a statement. “Under Housing First–San Diego, SDHC’s three-year homelessness action plan, we are committing up to 1,500 federal rental assistance vouchers to provide housing to homeless individuals and families. This includes 51 project-based housing vouchers for Atmosphere, with an estimated annual value of $504,288.”
Wakeland started working on the deal about six years ago, a few years after another firm’s plans to build condominiums on the site crashed.
The nonprofit kept the condo project’s name but otherwise started from scratch.
Assembling the financing for the big project came at a time when redevelopment agencies (RDAs) across California were eliminated as part of a budget-cutting move in 2012. RDAs were a key source of gap financing for affordable housing in the state, and the demise of the local agency put the project’s future in doubt.
Sauder and his team came up with a unique financing structure to keep the project moving forward.
Even though the development is a single building, Wakeland broke it up financially into two projects. One uses 9% low-income housing tax credits (LIHTCs), and the other uses 4% LIHTCs and tax-exempt bonds.
“It was a challenge,” Sauder says. “We basically broke it up as a condo and identified which units would go to the 4% (deal) and which units would go to the 9%.”
U.S. Bancorp Community Development Corp., the community development subsidiary of U.S. Bank, is the direct LIHTC investor. The bank is also the construction lender.
Despite the turmoil with the RDAs, Atmosphere was eventually able to secure former redevelopment funds from Civic San Diego, formerly the Centre City Development Corp.
“They were supportive of the project and wanted to see it happen,” Sauder says, noting a strong desire to serve San Diego’s special-needs residents. Thirty-one of the apartments will receive support from the state Mental Health Services Act (MHSA), and 20 units are for the formerly homeless.
The development’s remaining units will serve households earning no more than 60% of the area median income. As a result, Atmosphere will serve a broad spectrum of residents.
The MHSA funding came through the California Housing Finance Agency, and infill grants were provided by the state Department of Housing and Community Development. The LIHTCs were allocated by the California Tax Credit Allocation Committee.
The project is designed by Joseph Wong Design Associates.
Construction is expected to be completed in early 2017.