SAN JOSE — A big apartment complex in downtown San Jose could be converted into an affordable homes property, a shift that would terminate 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 currently slated to be transformed into an affordable housing complex.
The San Jose City Council is scheduled to meet Nov. 14 to consider a conversion proposal for Modera. This decision also includes a financing package to enable the transformation to affordable housing.
A $100 million package of tax-exempt bonds to finance the purchase of Modera The Alameda is the funding centerpiece of the affordable housing conversion, according to documents on file with San Jose officials.
The funding package of $100 million would be used for “the acquisition, rehabilitation, improvement, and equipping of 167 apartments and one manager’s unit to transition to an affordable housing development,” a city staff report prepared for the upcoming council meeting states.
“San Jose lacks a sufficient amount of affordable housing to meet residents’ needs,” the city staff report states. Referring to the plan to convert Modera to affordable housing, the report added, “This will allow the Modera development to move forward with its current financing plan and create much-needed affordable housing.”
The California Municipal Finance Authority, an agency jointly established in 2004 by multiple government agencies, is slated to issue the bonds for the purchase of the Modera apartment complex. The California Municipal Finance Authority acts as a conduit for tax-exempt bonds to finance an array of projects to promote economic development.
An affiliate that’s linked to AEW Capital Management now owns Modera, according to Santa Clara County real estate records.
The conversion proposal sketches out a plan whereby Catalyst Impact Fund, a nonprofit, would purchase Modera, the city documents show.
Catalyst already owns a portfolio of affordably priced apartment complexes in both the Bay Area and Southern California.
The purchase of the Modera apartments by Catalyst is scheduled to be completed on Nov. 29 of this year but also might take until Jan. 5 of next year to conclude, the city documents show.
Modera is a relatively new residential complex built in 2018, according to the apartments.com website. The five-story property also includes about 18,100 square feet of ground-floor retail that at present is 100% leased. Ace Hardware is one of the ground-floor merchants.
People who live in Modera typically pay monthly rents that range from a low of slightly more than $2,300 a month to nearly $4,600 a month, apartments.com reports.
“To avoid displacement of any current market-rate residents, units will transition to affordable upon move-out,” the city staff report states. “Existing residents who income-qualify will be offered affordable rates upon lease renewal.”
Of the 168 units, 34 units will be set aside for people at the 50% area median income level and the remaining 134 units will be restricted to people at the 80% area median income level, city officials say.
“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 city staff report stated.
The proposal though, would remove Modera from the property tax rolls — which means the complex would no longer generate property tax revenue once the new owner takes over.
About $1 million a year in property tax revenue would be wiped out as a result of conversion to affordable housing. The city will act as an administrator to ensure Modera remains affordable for the next 75 years, the staff report states.
Modera’s current assessed value is $101.7 million, county documents show.
Despite the property tax losses, the proposal paves a path to speedily bring more affordable housing to San Jose, in the view of Bob Staedler, principal executive of Silicon Valley Synergy, a land-use consultancy.
“This makes sense since existing units can be purchased for less than the exorbitant cost to build new affordable housing,” Staedler said. “I’ve been suggesting this model for years.”