City officials prep decision to clear path for conversion
SAN JOSE, Calif. — A large apartment complex in downtown San Jose could be converted into an affordable housing property, ending its status as market-rate housing.
Modera The Alameda, a 168-unit apartment building on The Alameda near the SAP Center and Diridon train station, is being converted into an affordable housing complex.
The San Jose City Council will meet on November 14 to discuss a Modera conversion proposal. This decision includes a financing package to facilitate the transition to affordable housing.
A $100 million tax-exempt bond package to finance the purchase of Modera According to documents on file with San Jose officials, the Alameda is the funding hub for the affordable housing conversion.
A $100 million funding package would be used for “the acquisition, rehabilitation, improvement, and equipping of 167 apartments and one manager’s unit in order to transition to an affordable housing development,” according to a city staff report prepared for the upcoming council meeting.
“San Jose lacks a sufficient amount of affordable housing to meet residents’ needs,” according to the city staff report. The report added, in reference to the plan to convert Modera to affordable housing, “this will allow the Modera development to move forward with its current financing plan and create much-needed affordable housing.”
The bonds for the purchase of the Modera apartment complex will be issued by the California Municipal Finance Authority, a joint venture of multiple government agencies established in 2004. The California Municipal Finance Authority serves as a conduit for tax-exempt bonds to finance a variety of economic development projects.
According to Santa Clara County real estate records, Modera is now owned by an affiliate of AEW Capital Management.
According to city documents, the conversion proposal envisions Catalyst Impact Fund, a nonprofit, purchasing Modera.
Catalyst already has a portfolio of low-cost apartment buildings in both the Bay Area and Southern California.
Catalyst’s purchase of the Modera apartments is scheduled to close on November 29 of this year, but it could take until January 5 of next year, according to city documents.
According to the apartments.com website, Modera is a relatively new residential complex built in 2018. The five-story building also has approximately 18,100 square feet of ground-floor retail space, which is currently 100% leased. One of the ground-floor merchants is Ace Hardware.
Modera residents typically pay monthly rents ranging from slightly more than $2,300 to nearly $4,600, according to apartments.com.
“To avoid displacement of any current market-rate residents, units will transition to affordable upon move-out,” according to a city staff report. “Existing residents who income-qualify will be offered affordable rates upon lease renewal.”
According to city officials, 34 of the 168 units will be reserved for people earning 50% of the area median income, while the remaining 134 units will be reserved for people earning 80% of the area median income.
“The 2023 income limit for households with 50% area median income is $62,450 to $89,200 a year and the 80% area median income is $96,000 to $137,100 a year,” the report said.
However, the proposal would remove Modera from the property tax rolls, which means that once the new owner takes over, the complex would no longer generate property tax revenue.
Property tax revenue would be reduced by about $1 million per year as a result of the conversion to affordable housing. According to the staff report, the city will act as an administrator to ensure Modera remains affordable for the next 75 years.
According to county records, Modera’s current assessed value is $101.7 million.
Despite the property tax losses, the proposal, according to Bob Staedler, principal executive of Silicon Valley Synergy, a land-use consultancy, paves the way to quickly bring more affordable housing to San Jose.
“This makes sense since existing units can be purchased for less than the exorbitant cost to build new affordable housing,” he said. “I’ve been suggesting this model for years.”