Other Central City
Multifamily Rental Housing
Community development corporation
Healthy place features
Historic tax credits
ULI Global Awards for Excellence 2015 Winner
A brief is a short version of a case study.
St. Joseph’s Campus in Oakland, California, offers 146 new apartments affordable to seniors and families with low incomes, on a multigenerational campus comprising three rehabilitated historic buildings, one new building, and amenities like gardens, community and art rooms, and social services. The campus was built in one of the costliest housing markets in the United States, and the deal was assembled during the immediate aftermath of the 2008 financial crisis, at a time when housing construction had come to a near-standstill.
The design sensitively creates environments that cater both to independent seniors who have aged out of their homes, as well as to large families seeking safe and clean housing. The campus rejuvenated a beloved local landmark, respecting the neighborhood’s history while adding substantial new housing density on a site near transit, shops, schools, and services.
Cynthia Parker, president and CEO of developer BRIDGE Housing, calls St. Joseph’s an “intergenerational campus that allows people to live, work, and play here . . . a vibrant place for many generations to come.”
The three-acre St. Joseph’s campus fills most of the city block along bustling International Boulevard, a major crosstown arterial with many small shops, between 26th and 27th avenues. Along the site’s southeast edge lies 12th Street, another major road mostly lined with warehouses and industrial buildings. The site is within the Fruitvale neighborhood, a dense and ethnically diverse but also economically challenged community about two miles southeast of downtown Oakland. Frequent local and express bus services run along International Boulevard, and the Fruitvale Bay Area Rapid Transit (BART) station is eight blocks to the southeast. The International Community School, a bilingual elementary school, is immediately southeast.
The St. Joseph’s Home for the Aged was built as a convalescent home in 1912 by the Little Sisters of the Poor, a Catholic order. The five-story, T-shaped edifice is set back from International Boulevard, its ample frontyard shaded by six century-old palm trees. Its stately Georgian brick facade and belfry made it a landmark in a neighborhood filled with modest stucco houses. Several outbuildings were located behind the main structure, notably a garage, laundry, and smokehouse clustered at the site’s southern corner, as well as a guardhouse. After decades of service, the Little Sisters decided that they could not afford to modernize St. Joseph’s and closed the home in 1979. Part of the building was later used as offices, and the building was declared a city landmark in 1984.
Beginning in 1992, Oakland has sought to rejuvenate and empower the Fruitvale area through transit-oriented developments. Community development groups have invested millions into improving the neighborhood’s residential and commercial offerings, like the well-known Fruitvale Village mixed-use development that replaced a parking lot at the BART station’s front door.
Concept and Design
St. Joseph’s Senior Apartments renovated and repurposed the historic St. Joseph’s Home as 84 units of senior housing, a community room, and 3,200 square feet of office space for community organizations. Terraza Palmera consists of a new L-shaped apartment building with 58 family-sized units and a community room at the western corner of the site, plus four more units and storage space carved out of the three outbuildings at the site’s southern corner. The main Terraza Palmera building replaced parking and storage, and wraps around a garden court with a community art room (the campus’s historic guardhouse) at its center. Senior apartments are affordable to tenants earning 30 to 60 percent of the region’s area median income (AMI), and family apartments are affordable to tenants earning 30 to 50 percent of AMI.
Architect Fred Pollack calls the rehabilitation of the St. Joseph’s Home, after decades of decay, “a labor of love.” The project restored the building’s wood windows and doors, tile floors, slate roof, grand entrance staircases, plaster crown molding, south-facing sun porches, and even the ornate stained-glass windows in its rear chapel—while also opening up the floor plan, abating asbestos and lead, adding new mechanical systems and modern fixtures, and upgrading the structure to current earthquake and accessibility codes. A new lobby was built at grade for improved accessibility, and features a mural painted by the local Eastside Arts Alliance.
Certain notable landscape elements that long defined the perimeter of the site were restored, notably an eight-foot-high wrought-iron fence along International Boulevard and a delicately reconstructed brick wall along 12th Street, and new gates were added to both to improve the site’s accessibility. What had been large expanses of asphalt surface parking were replaced with rain-friendly concrete pavers and 0.85 acre of gardens, including a communal vegetable garden behind the senior building, a shaded play courtyard within Terraza Palmera, and a lawn between the south corner’s trio of historic buildings.
While great care was taken to maintain the perimeter walls and fences, no fences separate the senior and family buildings on the St. Joseph’s campus. Instead, the seniors’ communal garden and the children’s play courtyard are separated only by an arc-shaped access drive.
Adding a 58-unit apartment building in the backyard of a landmark building was an entirely different architectural challenge. Terraza Palmera’s principal building was carefully sited to avoid affecting any of the site’s historic structures while creating a street presence along 26th Avenue and 12th Street. Its contemporary facade connects to the site’s history with a brick-lined ground floor that integrates with the property’s historic southern wall, and pastel green bays that echo the townhouses across the street.
Terraza Palmera offers generously sized apartments fit for families, which is among the most difficult products to deliver affordably. Three-fourths of its apartments have two or more bedrooms, and 20 have three bedrooms. In addition, the three units located within the historic laundry and one unit within the historic smokehouse offer vaulted ceilings, carved wooden beams, exposed brick, at-grade entrances, and other distinctive architectural features.
Fifty-five surface parking spaces were created as part of the St. Joseph’s Senior Apartments, and 50 were built in a garage beneath Terraza Palmera. Once excavation had begun on Terraza Palmera, construction crews discovered that the site’s water table was much higher than expected and additional waterproofing was needed for its garage.
Both buildings are Platinum GreenPoint Rated by Build It Green, a California-based green home certification program, thanks to a solar hot-water system and efficient fixtures that reduce water and energy use.
Development anywhere in the Bay Area is fraught with regulatory uncertainty, given the multiple layers of city and state review necessary. The scope of the St. Joseph’s campus, and its reuse of historic buildings, added state environmental and historic-preservation reviews to the already complex mix.
From the beginning, BRIDGE Housing understood that it would be important to keep separate approval tracks for the various phases and authorities, rather than making approvals contingent upon other approvals—even though combining approvals for the two phases might have seemed simpler. For instance, the planning approvals for each phase’s planned unit development were kept separate from city design approvals for each phase, which depended upon state historic design approvals.
Processing the approvals for each phase separately allowed BRIDGE to change course in 2008, when the financial crisis wiped out funding for homeownership projects. BRIDGE reached out to the local city councilmember to see about converting the second phase to rental, and to seek the appropriate municipal subsidies. The city of Oakland’s unwavering support of St. Joseph’s throughout its eight years of development greatly eased the transition to a completely different financing scheme.
The St. Joseph’s campus’s capital stack is a model of resilience and adaptability in the face of adversity. Even at the best of times, affordable housing in high-cost regions requires a complicated capital stack, but at St. Joseph’s that complexity was compounded by timing. BRIDGE Housing purchased the St. Joseph’s campus in 2006—just before the 2008 crisis.
Jonathan Klein, senior vice president of Union Bank, remarked at Terraza Palmera’s opening that BRIDGE surmounted especially high hurdles to complete St. Joseph’s: “I’m never going to stand up here and tell you [that] developing affordable housing is going to be easy. . . . It requires this kind of persistence in the face of really steep odds to really make this happen.”
The rehab of the senior building was the project’s first phase, with $5.3 million in historic rehabilitation tax credits at the foundation of its permanent capital stack. Low-income housing tax credits were next: BRIDGE sought the less lucrative, but automatically granted, 4 percent tax credits; at the time financing closed in May 2010, the actual tax credit amount was 3.36 percent of the project cost, claimable annually for ten years. Over ten years, the total tax credit amount that could be syndicated amounted to $11.7 million, yielding about $11.2 million in limited-partner equity for the project. Equity raised by syndicating these two tax credits accounts for about 40 percent of the project’s permanent financing, but because tax credits are paid out over several years the project still needed a large construction loan.
That construction loan was backed by about $19.4 million in tax-exempt private activity bonds sold through the California Municipal Finance Authority. (Projects financed with this type of bond are automatically eligible for the 4 percent tax credits.) Of that amount, $15.3 million was a construction loan at 4 percent interest that was repaid after 22 months with the tax credit equity and from local subsidies, and the remaining $4.1 million is being repaid from net operating income (primarily contracted Housing Assistance Payment rental subsidies paid by the Oakland Housing Authority). The permanent loan has a 20-year term and 5.85 percent interest, was underwritten at a 1.2 debt-service-coverage ratio, and accounts for 11 percent of the permanent financing.
For gap financing, BRIDGE Housing first turned to local and state governments. The city of Oakland, which has underwritten many efforts to improve the Fruitvale area’s quality of life, committed almost one-fourth of the project budget as soft debt: just under $4 million at the time of construction in a zero-interest, 55-year loan paid out of federal HOME funds; plus another loan on similar terms, drawn from Oakland Redevelopment Agency funds, that began at $3.9 million and increased to $4.6 million as part of the permanent refinancing.
The state of California’s Department of Housing and Community Development had committed to a $7 million soft loan in early 2008, but the funds were frozen and later retracted amid a state budget crisis that saw overall state spending cut by nearly one-third. This loan was backfilled by federal government economic stimulus funds, namely the Tax Credit Assistance Program administered by the U.S. Department of Housing and Urban Development (HUD) and the California Tax Credit Allocation Committee, using American Reinvestment and Recovery Act funds. The project had permits and the rest of its financing in place, making it an ideal “shovel-ready” project for job creation during the recession.
California voters authorized nearly $3 billion in general obligation bonds for housing and infrastructure under Proposition 1C in 2006, and the resulting California Recycle Underutilized Sites (CalReUSE) program provided a grant for just under $1 million for environmental remediation of the St. Joseph’s Home. Smaller grants were made by the Federal Home Loan Bank of San Francisco’s Affordable Housing Program ($415,000) and $150,000 from the Northern California Community Loan Fund and the Walter J. Haas Sr. Foundation. BRIDGE also invested $850,000 in equity as the general partner, and deferred its $575,000 development fee.
Terraza Palmera, the second phase, was initially conceived as affordable for-sale units rather than as rental units. However, the business plan changed after the recession: financing both to build and buy condominiums disappeared, but rental housing financing was still available. Overall funding for Terraza Palmera took many cues from the St. Joseph’s Senior Apartments capital stack. Again, shrewd timing helped BRIDGE Housing—but while the senior building benefited from recession-specific funding, Terraza Palmera snatched some of the last available dollars in two programs that state budget cuts had zeroed out.
Since Terraza Palmera also included renovations of a few small historic buildings, some of its project costs could be underwritten with $582,322 from the syndicated proceeds from historic rehabilitation tax credits. Low-income housing tax credits provided most of the equity investment for Terraza Palmera; Union Bank of California paid nearly $11.5 million for a $10.6 million allocation of 4 percent tax credits (as of January 2012, the actual rate was 3.19 percent). After the financial crisis receded, the low yields available on other investments focused banks’ attention on tax credit equity, which also garners banks’ favorable consideration under Community Reinvestment Act reviews and a pass-through share of the property’s passive losses. BRIDGE invested $1.1 million in general partner equity, as well.
Tax-exempt private activity bonds provided most of the project’s capital during construction and 13 percent of its permanent financing. These bonds funded a $15.8 million construction loan at 1.84 percent for 24 months, as well as two tranches of permanent financing extended by U.S. Bank: a 30-year mortgage for $2.5 million, at 4.74 percent, repaid from net operating income; and a 15-year mortgage for $1.6 million, at 3.92 percent, repaid from Oakland Housing Authority rent subsidies.
Gap financing again came from the same state and city sources, but with a twist: because the project had been delayed, the funds had been held over for years even as some of the programs that funded them expired amid continued state budget upheaval. Proposition 1C funds through the Infill Infrastructure Grant Program provided $3.2 million in 2008, which was finally disbursed when construction started in 2012.
BRIDGE was cobbling together gap financing in 2011, just as the state assembly decided (in another budget deficit closing move) to dissolve all of the state’s redevelopment agencies by February 2012. These agencies previously administered tax increment financing in targeted areas, like Fruitvale. BRIDGE moved to quickly close a $6.2 million soft loan from Oakland’s redevelopment agency in late 2011, months ahead of the construction loan’s closing. The city of Oakland again provided soft debt from its HOME funds: $1.2 million for construction and another $2.9 million at refinance. FHLB-SF, NCCLF, and the Haas Foundation contributed $735,000 in grants.
Performance, Management, and Impact
BRIDGE received over six applications for each unit available at St. Joseph’s, since it offers rents far below market levels in the costly Bay Area. The commercial space within the St. Joseph’s Senior Apartments building was a different story: The space delivered just as many of the nonprofit groups that it was intended to house were facing tremendous financial difficulties, particularly given the same state funding cutbacks that threatened St. Joseph’s on multiple occasions, and the space remained vacant for a few years.
BRIDGE Housing has on-site managers for both of the buildings. Local service providers offer on-site classes to residents in topics like English as a Second Language, cooking, and wellness.
The rejuvenation of St. Joseph’s Campus eliminated half a block of parking lots and dilapidated fences right behind Fruitvale’s main street, establishing a clearer boundary between Fruitvale’s core and the 12th Street industrial corridor. The increased activity throughout the day has improved safety at this formerly deserted location and brought new customers for local businesses. Its construction helped create jobs during the depths of the recession, and community-led mixed-income development continues to this day.
Most important, the St. Joseph’s campus offers 146 seniors and families a safe, decent, and affordable place to call home within a high-cost region, in a convenient location with transit, retail, and community facilities within walking distance.
Observations and Lessons Learned
The St. Joseph’s campus demonstrates that housing developers, especially in the affordable field, must be flexible and resilient in the face of challenges. Market conditions that are beyond anyone’s control can even affect what might seem like an obvious policy priority, like building affordable housing in the Bay Area. Not only did the recession cause government programs to appear and disappear, but the tax credit market also followed the banking industry’s fortunes, and the market for the site’s retail/office space disappeared amid funding uncertainty. Yet BRIDGE was able to roll with the changes, locating new funding both when the state loan was frozen and when the condo market collapsed, and lining up the Prop 1C and Redevelopment Authority funds for Terraza Palmera before those programs disappeared.
Even though the St. Joseph’s Senior Apartments was less an adaptive use than a renovation, the sheer amount of work required to repair the building after 30 years of neglect was surprising—yet tremendously rewarding. Total development costs per unit for the newly built Terraza Palmera were only 12 percent higher than those for the senior building.
Strengthening the Fruitvale neighborhood has required many strategic small steps over time. The St. Joseph’s Campus builds upon the work of other community groups up and down International Boulevard (including on adjacent blocks), brought a neighborhood landmark back to life, and kept the neighborhood’s forward momentum rolling through the Great Recession.
|Site purchased||March 2006|
|St. Joseph's Senior Apartments design approved||Late 2007|
|St. Joseph's Senior Apartments started construction||April 2010|
|St. Joseph's Senior Apartments completed||July 2011|
|St. Joseph's Senior Apartments leased up||December 2011|
|Terraza Palmera design approved||Late 2011|
|Terraza Palmera started construction||January 2012|
|St. Joseph's Senior refinanced||March 2012|
|Terraza Palmera main building completed||August 2013|
|Terraza Palmera historic buildings completed||November 2013|
|Terraza Palmera leased up||January 2014|
|Terraza Palmera refinanced||April 2014|
|Land plan||Square feet|
|St. Joseph's Senior Apartments buildings||18,704|
|Terraza Palmera buildings||24,184|
|Green space - St. Joseph's||8,926|
|Green space - Terraza Palmera||27,937|
|Total||126,759 sf (2.91 acres)|
|Rentable square feet by use||Square feet|
|Residential, St. Joseph's Senior Apartments||45,817|
|Commercial, St. Joseph's Senior Apartments||3,200|
|Residential, Terraza Palmera||56,383|
|Residential information||Number of units||Square feet||Rent (as of lease-up)|
|Studio unit||33||550||$485 - $808|
|One-bedroom unit||50||553||$520 - $866|
|One-bedroom unit||15||650 - 688||$519 - $923|
|Two-bedroom unit||26||850 - 917||$623 - $1,148|
|Three-bedroom unit||20||1,100 - 1,261||$720 - $1,340|
|Retail information||Square feet||Rent|
|Vacant||3,200||$21 per year|
|St. Joseph's Senior Apartments - Sources||Construction||Permanent|
|Tax-exempt permanent bond loan (project-based Section 8 loan)||$4,099,265|
|Tax-exempt construction bond loan||$19,370,073|
|TCAP-MHP backfill loan (2009 ARRA Stimulus funds)||$5,316,452||$7,088,603|
|City of Oakland Redevelopment Agency loan||$3,876,000||$4,639,000|
|City of Oakland HOME loan||$3,891,000||$3,991,000|
|FHLB Affordable Housing Program (AHP) funds||$415,000|
|NCCLF/Haas Sr. grants (private grants)||$150,000||$150,000|
|CalReUSE grant (from Proposition 1C funds)||$999,110||$999,110|
|General partner capital||$850,000||$850,000|
|Investor equity (low-income housing tax credits)||$1,549,908||$9,627,024|
|Investor equity (historic tax credits)||$5,286,573|
|Deferred developer fee||$575,000|
|St. Joseph's Senior Apartments - Uses||Construction||Permanent|
|Acquisition and land related||$7,334,712||$7,334,712|
|Architecture and engineering||$2,072,494||$2,072,494|
|Other expenses (permits, appraisal, market study, etc.)||$1,840,096||$1,840,096|
|Developer fee and syndication costs||$1,140,364||$2,726,518|
|Terraza Palmera at St. Joseph's - Sources||Construction||Permanent|
|Tax-exempt permanent bond loan||$2,471,900|
|Tax-exempt construction bond loan (project-based Section 8 loan)||$1,636,043|
|Tax-exempt construction bond loan||$15,753,889|
|City of Oakland Redevelopment Agency loan||$6,152,656||$6,152,656|
|City of Oakland HOME loan||$1,218,035||$4,125,344|
|FHLB Affordable Housing Program (AHP) funds||$610,000||$610,000|
|Infill infrastructure grant (from Proposition 1C funds)||$3,189,280||$3,189,280|
|NCCLF/Haas Sr. grants (private grants)||$125,000||$125,000|
|General partner equity||$1,100,000||$1,100,000|
|Investor equity (including tax credit equity)||$616,200||$11,841,514|
|Accrued/deferred Interest on soft loans||$219,619||$219,619|
|Terraza Palmera at St. Joseph's - Uses||Construction||Permanent|
|Acquisition and land related||$3,767,684||$3,767,684|
|Architecture and engineering||$2,575,197||$2,575,197|
|Other expenses (permits, appraisal, market study, lease-up, insurance)||$1,999,366||$1,999,366|
|Developer fee and syndication costs||$295,000||$2,545,000|
Developer, owner, and manager
BRIDGE Housing Corporation
San Francisco, CA
Van Meter Williams Pollack
San Francisco, CA
James E. Roberts–Obayashi Corporation
Ellen Anderton, marketing communications manager, BRIDGE Housing
Patrick L. Phillips
Global Chief Executive Officer
Kathleen B. Carey
President and CEO, ULI Foundation
Senior Vice President
Case Studies and Publications
Case Studies and Publications
James A. Mulligan
Senior Editor/Manuscript Editor
David James Rose
ULI Global Awards for Excellence 2015 Winner
Note: This Case Study Brief draws extensively on information and text from a submission to the 2015 ULI Global Awards for Excellence program.