San Jose subdivision near downtown gets big loans for project

A mixed-use development consisting of 166 residential units and 1,500 square feet of ground floor retail located at 802 South First Street in San Jose, concept.

SAN JOSE — A large development that would produce well more than 150 apartments near downtown San Jose has overcome a major financing hurdle by landing financing that would allow the project to be built.

A real estate alliance has proposed the development of 166 residences, consisting of 164 affordable units and two executive residences at 802 South First Street in San Jose, according to several public documents.

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 cost of the project is $95.9 million, according to public records filed with the California Tax Credits Allocation Committee. Conventional real estate financing, state-guaranteed financing and California tax credits will help cover the overall price of the development.

Housing Development Allies secured $66 million in financing from PNC National Bank, according to documents filed with the Santa Clara County Recorder's Office on May 30.

That financing consists of a $29 million construction loan and temporary financing in the form of a bridge loan totaling $37 million, according to county records.

Additionally, the project benefits from state-backed funding in the form of tax-exempt financing, tax credits, fee deferrals and other financial instruments to help close the gap to cover the overall cost.

Maracor Development, a San Francisco-based real estate company; Pacific West Communities, an Idaho-based apartment developer; and Central Valley Coalition for Affordable Housing, a Merced-based nonprofit, partnered to develop the site and secure funding.

The project site is near the southern limits of downtown San Jose and the vibrant SoFA district of the urban core.

“These housing units can move downtown activity further south,” said Brad Dickason, Maracor senior director. “The project will help 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 struck a deal to lease the land.

The ground lease provides a rental income stream to the D'Amico family rather than a one-time boost in cash flow through a conventional sale of the land needed for the residential project, according to Borelli.

Additionally, the development alliance can save money through land leasing. This arrangement allows the development group to save on project costs by leasing the land for the project rather than paying extra to own the parcels.

“The ground lease makes it easier for us to get the capital we need to make the project feasible,” Dickason said.

The six-story residential building would include 1,500 square feet of ground-floor retail and would be built on a 1.2-acre site.

The affordable housing development could be completed by the end of 2026.

Construction crews will spend the summer building a new driveway adjacent to the project to replace the driveway that now runs through the middle of the development site, Dickason said.

“We hope to start construction on the building by September,” Dickason said. “It will take us about two years to complete the project. »