Officials have agreed to postpone certain deadlines on a large mixed-use housing development on the San Francisco Bay Area waterfront until economic conditions improve.
The Alameda City Council voted to grant a request from Roseville-based Tim Lewis Communities to postpone several so-called milestones on an apartment-focused redevelopment of a former industrial property known as Encinal Terminals. The developer formally requested the delay in October, citing a “terrible macroeconomic environment” that has stymied multifamily ventures in the Bay Area and made it nearly impossible to obtain financing to move forward on the project or sell the property.
At a Jan. 7 meeting, several Council members stressed that the extension would not change the 2037 deadline for the project's completion.
Under the current master plan, the development of the 100-year-old bayfront shipping site would include up to 589 homes, 80 of them affordable to moderate and low-income residents, and up to 50,000 square feet of commercial space, a marina with spaces for 160 boats and 7 acres of parks and open space. The project would include a 14-story residential apartment building, as well as condos and townhouses.
Alameda is required by the state to build more than 5,300 new residences by 2031 to fulfill its housing element, a plan all cities must come up with to do their part to solve California's housing crisis. City staff noted that the Encinal Terminals project would satisfy some 11% of its current goal for new housing.
"I can't wait for this project to be completed," said Mayor Marilyn Ezzy Ashcraft at the meeting, noting that the blighted site has stood vacant for decades. She said it was important to prevent any possible land banking by developers and ensure that even if another firm were to take over the long-planned project, they wouldn't be put at a disadvantage by a shorter time frame.
"We've been at this now for 12 years. It's a bumpy road," Michael O'Hara, the developer's director of forward planning, said during the meeting.
'Not the same world'
"It's not the same world or the same real estate market as when we got this project approved," acknowledged Alameda Community Development Manager Walker Toma at the meeting, explaining that without the extensions, the complex agreement between the city and developer to enable the project would dissolve.
"We’d be going back to square one," the mayor echoed.
O’Hara cited a combination of falling rents and high construction costs, interest and capitalization rates that took hold after the ambitious project was greenlighted in 2022.
"We know very well how critically important this project is to the city," O'Hara told officials at the meeting. "This extension will give us time to complete the next steps necessary to get the project underway."
The plan for the 32-acre site has been in the works since 2013, when Tim Lewis Communities bought the property for about $12.5 million, according to CoStar. During World War II, the facility was a Navy supply depot, and afterward, it serviced hundreds of cargo ships until it was eclipsed by the Port of Oakland in the 1960s. It served as a shipping container storage facility until it closed in the 1990s.
The plan to redevelop the land — part of a larger transformation of Alameda's waterfront — required an expensive land swap agreement that had to be enabled by a state law passed specifically for the project in 2023.
But market conditions have changed dramatically since then, O'Hara told CoStar News. “The market is such right now that apartments are simply not penciling anywhere in the Bay Area," he said.
Development challenges
The region ended 2024 with a decade-low level of new multifamily construction, according to a CoStar analysis. Going into December, developers had broken ground on fewer than 2,900 units in the past 12 months, the lowest total of new homes since the Great Recession and marking a substantial drop from the area's pandemic-era peak of 8,750 units in 2022.
Nationwide, a sharp contraction in construction financing has fueled this pullback.
Beginning in early 2023, banks and other lenders scaled back significantly on multifamily construction loans, according to CoStar. Interest rates were prohibitively high for those still offering financing, making many proposed developments financially unviable.
The project is not the first ambitious housing development to face challenges in the island community of Alameda, a family-friendly city just southwest of Oakland that’s known for its iconic Victorian homes and its decommissioned Naval Air Station.
The town is also known for passing a law back in 1973 that outlawed the construction of multifamily apartment buildings in much of the city. In 2020, the town voted down a ballot initiative to throw out that law as “exclusionary zoning” meant to prevent racial and economic diversity.