Conversion planned for East Bay apartment complex that just sold for $304M
Danville-based Opportunity Housing Group has plans to convert nearly 500 homes in the East Bay into workforce housing.
The real estate investor, in partnership with the California Statewide Communities Development Authority (CSCDA), acquired the 484-unit Wood Creek Apartments in Pleasant Hill for $304 million just before the end of 2021, OHG announced in a release Tuesday. The group declined to disclose the seller, but SEC filings identify Chicago-based Equity Residential (NYSE: EQR) as the previous owner.
CSCDA financed the acquisition through its workforce housing program, which it launched in 2020 with the goal of converting existing market-rate homes into housing stock affordable for California’s “missing middle.” That demographic — families and individuals earning anywhere between 60% and 120% of an area’s median income (AMI) — often struggles to find housing they can afford in California, real estate observers say, but does not qualify for state or federal rental assistance.
At Wood Creek, located at 637 Stonebridge Way, CSCDA and OHG will reserve one-third of the housing for residents and families making up to 80% of AMI, another third for those making up to 100% of AMI and the final third for those making up to 120% of AMI, according to the release.
Existing residents of the complex, which is currently more than 95% occupied, will not be displaced and can continue to rent units at market rate, but new leases for discounted rents may only be signed by income-qualified tenants, according to Lauren Seaver, a co-founder of OHG.
Given that market turnover for the complex is expected to be around 50% each year, Seaver told me, the pair expect Wood Creek will be fully leased to income-qualified tenants in the next two to three years. Average rent across Wood Creek’s 76 one-bedroom units and 408 two-bedroom units runs just under $2,700, according to Seaver.
CSCDA, a joint powers authority whose membership includes more than 500 jurisdictions and agencies around California, issues municipal bonds to fund the acquisition of existing housing developments. The Wood Creek acquisition is the program’s largest so far, Seaver confirmed. It marked OHG’s sixth and final acquisition in partnership with CSCDA in 2021. The pair’s portfolio now spans 1,600 units across California and represents a total investment of about $920 million, Seaver said.
Seaver, also a principal with Blake Griggs Properties, an affiliate of OHG’s, said missing middle housing in California is made nearly impossible for developers because of the development cost. For developers — including Blake Griggs — project financials typically only pencil at “the highest end of the rent spectrum,” she said. Bay Area jurisdictions, alongside the rest of the state, have historically struggled to meet state-mandated assignments for moderate-income units. Oakland, for example, had produced just 3% of the units assigned to it by the end of 2020, according to its most recent progress report.
“Thirty percent of the workforce in the Bay Area falls into the income limits for the missing middle,” Seaver said. “These are the folks being squeezed by increasing rents and driving longer distances to their place of work.”
The Wood Creek acquisition is the sixth to come out of the partnership between OHG, which acts as an asset manager for the properties, and CSCDA, Seaver said. The pair’s joint portfolio now spans 1,600 units across California, representing more than $920 million of capital deployed. CSCDA, which issues municipal bonds to finance acquisitions, has successfully acquired around 7,000 units via various partnerships around the state so far, according to Seaver.