Affordable Housing Renovation Values Public/Private Partnership

By Laura Archuleta, President, Jamboree Housing Corporation

Sacramento, Calif.—The most successful public/private partnership is one in which the parties on both sides are firmly committed to achieving an agreed-upon goal. In the case of Jamboree Housing Corporation, that goal is the creation of affordable workforce housing, which in most instances requires an extremely strong bond between the developer and the hosting agency and/or governmental entity to be successful.

Jamboree’s approach in working with cities and counties is to position ourselves as an extension of the housing or redevelopment agency staff, providing necessary designs, information and professional resources, but always mindful of our supporting role. One of the most challenging projects our company has undertaken, and one in which a strong public/private partnership has played and continues to play a critical role, is the renovation of the historic Hotel Berry in downtown Sacramento in partnership with Sacramento Housing and Redevelopment Agency (SHRA). The Sacramento Housing and Redevelopment Agency combines the City of Sacramento and the Sacramento County housing and redevelopment agencies into a single entity.

Currently undergoing a major refurbishment literally from the ground up, redevelopment of the 80-year-old hotel is the epitome of a public/private joint venture based on a shared vision that the hotel’s character and historic significance are worth preserving and celebrating. Hotel Berry has been an integral part of Sacramento’s downtown since 1929, and we agree wholeheartedly with SHRA that it still has an important role to play in providing desperately needed affordable housing in the central city.

Located at 729 L Street near 7th Street in the heart of downtown Sacramento, the six-story Hotel Berry has been an historic presence in the city’s central business district since it opened the same year the Great Depression began. The hotel’s history is a reflection of the growth and evolution of Sacramento itself. Following World War II, Sacramento’s population began to shift away from the city center to the suburbs in step with the out-migration that was happening in many other metropolitan areas across the country.

Glory days are gone

Once one of downtown Sacramento’s finer hotels, the Berry saw its glory days fade away and for the better part of the past two years, it has sat empty and forlorn. However, SHRA believes that a structure, regardless of its age, should when possible be saved and reused for affordable housing. Preservation of such structures also provides a greater environmental benefit by conserving resources, reducing stress on infrastructure, incorporating current sustainability components and keeping refuse out of the landfills. We concur totally with this philosophy.

Historic or not, renovating an older structure is always difficult with many unknowns behind walls and under floors, and thus Hotel Berry has highlighted and underscored the multiple challenges of creating and maintaining a public/private partnership. While this complex refurbishment is an excellent example of what an effective public/private collaboration can accomplish in urban redevelopment, it has nonetheless been a rocky road.

In late 2007, an effort to preserve the Hotel Berry was launched when Trinity Housing Foundation purchased the building in partnership with The AF Evans Company. The venture partners intended to undertake a substantial rehabilitation of the property using a combination of SHRA funds and federal 9 percent Low Income Housing Credits (LIHTC). In April of 2008, the partnership’s tax credit application was successful and it received an award valued at more than $13 million, which represented a large portion of the projected $21 million construction budget.

However, like so many development plans in an unstable economy, the project hit a roadblock. Upon receiving the award, AF Evans and SHRA actively sought a tax credit equity investor and construction lender. Unfortunately, due primarily to the nationwide financial crisis, the project received very little interest from the investment community, and Trinity/AF Evans eventually returned the tax credits to the state and bowed out of the project. In March 2009, SHRA acquired the hotel property and put the renovation work on hold for a suitable development opportunity.

Overcoming the challenges

Although SHRA’s goal of renovating the Hotel Berry did not waver, the challenges of structuring another successful public/private partnership would add a level of difficulty to the project. Nevertheless, SHRA moved ahead and in June 2009, Norwood Avenue Housing Corporation, the local nonprofit public benefit corporation affiliated with SHRA, applied for and received a federal 9 percent LIHTC allocation and approval for a one-time $13.5 million award of American Recovery and Reinvestment Act (ARRA) exchange funds. Through a Request for Qualification process issued by SHRA, the search began for an affordable housing developer with the expertise, experience and resources to make the Hotel Berry renovation a viable project.

Jamboree did not have specific experience with a renovation project of this scope, but knowing that SHRA would be our public partner, our company responded to the RFP. After considerable study and discussion (we knew this was going to be an enormously challenging but necessary project), Jamboree was selected in late 2010 to completely renovate and modernize the historic hotel. Not a newcomer to Sacramento, the Hotel Berry is our eleventh development in Sacramento County and we have great respect for SHRA as a trusted partner in this project. Without that respect and trust, we probably would have never become involved in the first place.

In December 2010, Jamboree secured all financing including loans from SHRA, and closed on the purchase of the vacant property, renewing hope shared by both partners that the Hotel Berry would finally return to its former downtown prominence. The partnership with SHRA played an important role in securing funding for the renovation and is a case study in creative public/private financing.

SHRA’s innovative funding strategy successfully layered local and federal support, and pioneered the exchange of tax credit equity funding with ARRA grant funds totaling $13.6 million in permanent financing. Additionally, SHRA contributed $10.1 million in permanent financing, U.S. Bank provided $5.5 million in construction loans, and Sacramento County’s Community Resource Project Inc. was instrumental in Jamboree receiving an allocation of $500,000 in federal weatherization funds.

A historically significant building

Though not currently on the Historical Building Register, the Hotel Berry is being renovated as a historically significant building, retaining all historical marquees, window size and location, signage, awnings and roof details. Scheduled for completion in early 2012 and now called The Studios at Hotel Berry, the hotel is undergoing an ambitious refurbishment and seismic retrofit that includes two-bay steel braced frames, foundations and soft story bracing, wall anchorage, plywood floor sheathing, brick repointing, corner strengthening and roof parapet bracing.

In keeping with Jamboree’s commitment to sustainability, The Studios at Hotel Berry will feature water-saving fixtures in kitchens and bathrooms, CRI Green Label carpeting, and low-VOC interior paint and adhesives. It will exceed Title 24 Cal Green energy efficiency standards by more than 15 percent. Another significant sustainable factor is the property’s downtown location that makes it a viable transit oriented development (TOD). The building is within walking distance of several modes of public transportation including light rail, bus lines and an Amtrak rail station.

The “new” Hotel Berry will be available to individuals earning between 30 to 45 percent of the Area Median Income. The property will feature 104 Single Room Occupancy (SRO) studios and a manager’s unit, and will also encompass ground floor retail space for a family owned convenience store. Residents will enjoy community amenities on the ground floor that include recreation and meeting rooms, laundry facilities, a computer center and a large community kitchen and dining room, as well as free on-site resident service programs provided by Transitional Living and Community Support (TLCS). Through funding provided under the Mental Health Services Act (MHSA), 10 of the studio apartments will be set aside for residents who will receive supportive services.

From our perspective, the Hotel Berry restoration represents what a public/private partnership is all about and the affordable housing benefits it can bring to a community and its residents. It also underscores an exciting and growing trend in America’s cities—the reawakening of historical and cultural interests in urban areas with a focus on new uses for existing structures regardless of age. The Studios at Hotel Berry is a win-win for everyone involved.

Laura Archuleta is president of Jamboree Housing Corporation. Since 1999, Archuleta has guided Jamboree Housing Corporation from a small, Irvine, Calif.-based nonprofit affordable housing developer with 750 homes into a leading statewide provider of more than 6,700 for-sale and rental homes in more than 66 communities. Since joining Jamboree, she has grown the company’s asset portfolio to a market value of nearly $1 billion, directly benefiting some 16,750 Californians. For more information, go to www.jamboreehousing.com.