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WS Communities Secures $157 Million Loan for Market-Rate SRO Developments
By Jorge Casuso
March 4, 2020 -- Santa Monica's largest residential developer has received a $157 million loan to build ten apartment buildings Downtown, according to a Los Angeles real estate site.
They include six market-rate single room occupancy (SRO) developments that triggered a legal battle with the City last year.
The bridge loan from Madison Realty Capital paves the way for WS Communities to construct a total of 849 rental units with a combined 35,000 square feet of retail space, The Real Deal reported Wednesday.
The ten developments are part of an agreement with the City to increase affordable housing, as Santa Monica faces a state mandate to dramatically boost its housing production ("Housing Targets Will Be Difficult to Contest, Experts Say," December 17, 2019).
The ten "highly desirable" mixed-use development sites are in a city “where there is a tremendous amount of demand for quality housing and a lack of supply,” said Josh Zegen, a principal at Madison Realty Capital.
The six SRO developments -- clustered on 5th, 6th and 7th streets between Colorado and Arizona avenues -- received the go-ahead under a settlement agreement approved by the Council last June ("Market Rate SROs Get Go-ahead Under Settlement Agreement," July 1, 2019).
Under the agreement, the proposed projects were enlarged to accommodate more affordable and larger units ("First Two Revised SRO Developments Get Hearing," December 5, 2019).
Of the total units, 15 percent must be affordable to persons earning 80 percent of the median income for Los Angeles County, which would be no more than $54,250 a year.
Under the original proposals, 5 percent of the units were affordable.
The six projects -- which feature market-rate SRO units that range from 220 to 375 square feet -- used a loophole in the Downtown Community Plan that encourages housing construction.
The City Council quickly blocked the projects with an emergency interim ordinance approved last March.
Two months later, the Council unanimously voted to make the ban permanent ("Council Permanently Bans Market-Rate 'Micro Units,' At Least For Now," May 15, 2019).
But the market-rate micro-units had their defenders at City Hall.
The Planning Commission opposed the ban arguing the developments filled a valuable niche in Santa Monica's housing market ("Planning Commission Rejects Council's Request to Propose Ban on "Micro Units," May 2, 2019).
In addition to the six SRO developments, which include a total of 12,400 square feet of ground-floor retail, the loan will finance the construction of four other Downtown residential projects.
They include a 140-unit complex at 601 Colorado Avenue with 8,600 square feet of retail space and a 94-unit project at 501 Broadway with 4,700 square feet of retail.
The other two developments financed by the loan are a 92-unit project with 5,800 square feet of retail at 1425 5th Street and a 43-unit project at 1318 Lincoln Boulevard with 3,300 square feet of retail.
Last last year, Madison Realty Capital gave WS Communities a $345 million loan for seven of its properties, including two ground-up developments.
“Madison’s team has once again delivered as promised and we look forward to expanding our relationship with them in the future,” said Scott Walter, CEO of WS Communities.
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