SAN JOSE — A big housing development that would produce well over 150 apartments near downtown San Jose has cleared a major funding hurdle by landing financing that would enable the project to be built.
A real estate alliance has proposed the development of 166 residences, consisting of 164 affordable units and two manager’s residences at 802 South First Street in San Jose, multiple public documents show.
The project would be located near the corner of South First Street and Virginia Street and the corner of South Second Street and Virginia Street. The property includes the former site of D’Amico Tires.
The overall project cost is $95.9 million, public records on file with the California Tax Credit Allocation Committee. Conventional real estate financing, state-backed funding, and California tax credits will help cover the overall price of the development.
The housing development allies have landed $66 million in financing from PNC National Bank, according to documents filed with the Santa Clara County Recorder’s Office on May 30.
This funding consists of a construction loan of $29 million and temporary financing in the form of a bridge loan totaling $37 million, the county records show.
Plus, the project is receiving state-backed financing through tax-exempt funding, tax credits, fee deferrals and other money vehicles to help cover the gap to cover the overall cost.
Maracor Development, a San Francisco-based real estate firm; Pacific West Communities, an Idaho-based apartment developer; and Central Valley Coalition for Affordable Housing, a Merced-based nonprofit, have teamed up to develop the site and obtain the financing.
The project site is near the southern edges of downtown San Jose and is near the urban core’s lively SoFA district.
“This housing can move downtown activity further south,” said Brad Dickason, a principal executive with Maracor. “The project will help to activate this part of San Jose.”
As part of the transaction, the D’Amico family which owns the property, agreed to provide a ground lease to the development alliance. San Jose-based real estate broker Ralph Borelli arranged the deal to rent the land.
The ground lease provides a flow of rental income for the D’Amico family rather than a one-time bump in cash through a conventional sale of the land needed for the residential project, according to Borelli.
Plus, the development alliance can save money through the ground lease. This arrangement enables the development group to save on project costs by renting the land for the project rather than paying extra to own the parcels outright.
“The ground lease makes it easier for us to get the capital stack we need for the project to be feasible,” Dickason said.
The six-story residential building would include 1,500 square feet of ground-floor retail and be built on a 1.2-acre site.
The affordable housing development could be completed by the end of 2026.
The construction crews will spend the summer to build a new alleyway adjacent to the project to replace an alley that now runs through the middle of the development site, Dickason said.
“We hope to kick off the construction of the building by September,” Dickason said. “It will take us about two years to complete the project.”