When the Martin Building Co. snagged $33 million in construction financing from the AFL-CIO Housing Investment Trust earlier this year, no announcement was made to trumpet the deal.
There probably should have been: The loan, which will help Martin break ground on a 94-unit apartment project, was the first major housing construction financed in the city since February of 2008.
The AFL-CIO financing was only one of the pieces cobbled together to fund the project at the old Arc Light building at 178 Townsend St. In addition to the AFL-CIO investment, Martin Building received $3.5 million in state Prop 1C money, $1.25 million in federal stimulus money to clean up the former industrial parcel, and the entire construction loan is being insured by the Federal Housing Administration.
Ted Chandler, chief operating officer for AFL-CIO Housing Investment Trust, said the Trust is doing what it can to get housing construction jump started in San Francisco.
“The Arc Light project made sense because San Francisco is a very strong market and we think the housing market generally is going to start doing better and better,” said Chandler. “As conventional Wall Street financing remains sidelined, we find we bring a scale and flexibility that helps get these developments under way.”
Getting creative
Since the economy tanked in the fall of 2008, tower cranes have vanished from the San Francisco skyline. Condo financing has all but evaporated as banks, insurance companies and pension funds have fled the scene.
But that doesn’t mean builders have been idle. Apartment developers and those who could convert condo projects to apartments — groups like Avant Housing LLC and the Emerald Fund Inc. — have turned their energy to creative financing, plunging headfirst into a Byzantine world of public sector housing construction programs: HUD-backed Section 220 and 221 programs, state Prop 1C money and any other angle they can work.
At 333 Harrison St., the Emerald Fund has received $11.6 million in state Proposition 1C funds on the $100 million, 308-unit project. The company has also applied for a $5 million Proposition 84 grant to help Emerald Fund create a 24,000-square-foot park on Harrison Street. The developer has also applied for $2 million in federal stimulus money.
“The world changes and you are scrambling,” said Emerald Fund President Oz Erickson. “That is when you apply for the Prop 1C grant, for the Prop 84 grant. This is the first time I have applied for public money.”
But the chief program developers have turned to is the FHA-backed Sections 220 and 221 — a federal program that funds rental apartments rather than condos.
In total, San Francisco developers are in line for FHA-backed loans that would add more than 750 units to the city. These include Emerald Fund’s 308-unit 333 Harrison, Avant Housing’s 194-unit 1880 Mission St.; and two Martin Building projects at 2235 Third St. and 178 Townsend St. that total 264 units. In addition, Avant is considering seeking FHA-backed loans for the construction of 440 units in SoMa.
Avant Housing Executive Vice President Eric Tao said the company has applied for an FHA-backed loan on 1880 Mission and hope to start construction in the second quarter of 2011.
“We have had conversations with the Bank of America and Wells Fargo and US Bank. There is a slight but discernible turn in the lending market right now,” said Tao. “We are very positive about San Francisco … but at the end of the day it’s all about financing.”
Signs of hope
In addition to the AFL-CIO, Citibank seems poised to lead San Francisco’s next generation of housing lending. Both groups are in negotiations with Lennar Urban to provide constructing financing on the first phase of the Hunters Point Shipyard development, a project that is six months behind because of the shortage of capital. Citi Community Capital Assistant Vice President Charlene Miller confirmed that the lender is talking to Lennar about investing in the shipyard.
“We have come out of the worst of this economy and are excited about working in San Francisco again,” she said.
The $3.7 billion AFL-CIO Housing Trust has pumped $400 million in housing construction financing in the last six month; the goal is to create 10,000 construction jobs during the next year.
“We want to see what we can do to get the ball rolling out there in the Shipyard,” said Chandler. “That is really where the whole new community needs to be built and will be built. It’s a great investment opportunity and will generate construction jobs that are so badly needed.”
In addition to Lennar, Chandler said the Trust is talking to some of the “best residential developers in the city. We have a strong relationship with the city and the local trades. … We are optimistic we will have additional opportunities in San Francisco in the next year.”
Kevin Redford of Holliday Fenoglio Fowler, a commercial mortgage brokerage, said the picture will brighten considerably this year, particularly for broken apartments deals that can be acquired cheaply. In early June, Redford arranged a $26.5 million construction loan for the stalled City Walk project in Oakland.
“The appetite for multi-family construction loans has changed dramatically in the last 60 days,” said Redford. “There are life (insurance) companies and there are banks and for the right opportunity there is capital available.”
