A New York investment firm specializing in affordable housing worked with local agencies to preserve below-market rents in the third-most expensive housing market in the country, earning its efforts a 2024 CoStar Impact Award, as judged by real estate professionals familiar with the market.
Jonathan Rose Cos. purchased the The Grove in San Jose for $102 million from Nuveen Real Estate by taking advantage of some creative financing work by Berkadia Commercial Mortgage. Berkadia assisted Jonathan Rose is securing a rate-locked, $68.5 million Affordable Housing Preservation loan.
As part of the closing, Jonathan Rose came to an agreement with a regional public organization known as the Bay Area Housing Finance Authority to lock income and rent restrictions on all 331 units at 80% of the area's median income. The terms also restrict annual rent increases to 3%. The company also plans to hire staff and provide social services to support tenants.
San Jose has the third highest rents in the United States, according to CoStar data, behind New York and San Francisco. Tenants are paying an average price of $2,970 per month in a market that is home to many employees of the largest tech companies in the world. The Grove is currently asking tenants for $2,388 per month.
About the project: As part of the deal, Jonathan Rose agreed to make $11 million in capital improvements. It is also exploring opportunities to convert gas equipment to electric, utilizing incentive programs.
What the judges said: "Although affordable housing is very much in demand during a time of inflation, low inventory and high-interest rates, the extra steps that Rose took to create a community by implementing creative and resourceful social services programs serve as a benchmark for future affordable housing landlords/developers to come," wrote Devon Stout, vice president at Compass Commercial.
They made it happen: Berkadia Commerical Mortgage was represented by Senior Managing Director Tim Leonhard. The Jonathan Rose team included Margot Besnard, associate of acquisitions; Max Jawer, senior director of acquisitions; Nathan Taft, chief investment officer; Lauren Zullo, managing director of impact; Marcella Yee, construction project manager; Michael Brod, senior project manager of environmental impact and strategy; and Salvatore Saglimbeni, executive director of investments.
Senior marketing manager Ashley McClain contributed to the story.