Quote:
Originally Posted by wburg
It seems like every time housing is proposed in the central business district, excuses come up as to why it can't happen, or the number of units gets shaved down. 50 units on a 10 acre site is just plain silly--that's actually a lower population density than the central business district has now, at about 7 units/acre. Other than the 700 K Street apartment building, I'm not sure there are any concrete plans for housing in the central business district, which should really be seeing thousands of units.
I assume part of this is because the major developer groups in the region are still suburban developers, who still depend on the creation of new suburbs, and many of those developers feel that downtown housing is a threat to their business model. They want these young Millenial professionals to buy single-family homes in their suburbs, not living downtown in converted old office or industrial buildings or new high-rises/mid-rises, and the arena is there to encourage them to drive downtown, spend money, and then drive home. What really happens is, when Millenials (or GenXers or whatever) who want to live and work downtown see Sacramento and discover they can't get the housing type they want, instead of shrugging their shoulders and buying a McMansion in North Natomas, they shrug their shoulders and pick another city.
Even the draft Downtown Housing Initiative (click for a link to the draft plan) seems more intended as a way to streamline suburban development proposals even as it attempts to put Downtown front and center, as it was also written in part by suburban developer advocates like Region Builders. While the emphasis on affordable housing and housing for homeless is something I support, I assume that their inclusion are a way to discourage "market rate" customers from wanting to live downtown as it plays into their fears of living next door to "the projects." Downtown Sacramento Partnership and Midtown Business Association both went to great efforts to produce studies claiming that they already have far too much low-income housing already, as if intending to divert the proposed 2500 low income/1500 homeless housing from their boundaries, which begs the question, where is this low-income housing supposed to go, not to mention the 6000 proposed units of market rate housing? From the look of things, it's not going to fit into the Arena site, and the housing count in the Railyards looks like it's going to be cut in half. |
It's important to remember how complex development deals are and how many masters a developer must answer to. Above all others is the financial master, those people and institutions who are investing in your project and to whom you are promising a specific return.
One of the first questions any investor, of any size, asks you to answer is, "What are similar products in that market delivering?" You need to prove that your proposal will sell as promised, and the best way to do that is by using other projects with a similar profile as a guide.
There are no other high-rise condos anywhere in Sacramento. Selling this concept to financial institutions for funding would be virtually impossible.
One of the few scenarios where you could attract capital in lieu of a demonstrable track record of product success is with a strong developer that enjoys superb relations with financiers. I am sure that is the case here, but even with that advantage, investors typically resist an unproven model.
What I imagine happened is that when the arena team shopped this project to investors, the response to the condos was tepid at best. But given the strong track-record of the developer and the good relationship, a compromise was reached by cutting the number of units from 69 to 50.
These units MUST be successful. While possible, we are unlikely to see high-rise residential (for-sale) built in Sacramento until some kind of track record has been established. So I wouldn't look for any for-sale high-rise product to get announced in Sacramento until 2017. But if these units quickly sell-out, look for a land rush of new residential, for-sale, high-rises downtown.
301 CM could prove the exception to that, but again, it would require a strong developer with an outstanding history of successful, high-rise residential.
As far as any assertion that Sacramento developers see downtown housing as a threat to their business model blah blah blah... meh. What is more likely is that because they have zero experience with a high-rise product, no one will finance anything other than what they are historically successful at.
I know that doesn't agree with some people's preferred narrative, but as someone who does this successfully for a living, it is probably far closer to the truth...
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