San Jose affordable homes project gets boost from creative deal

In an unusual twist, real estate firm Safehold has bought the land beneath the project and is renting the land to the project's developer, The Pacific Cos. This arrangement means that the developer can save money by leasing the land rather than pay money to buy the land.

SAN JOSE — A San Jose housing development that would produce more than 100 affordable homes is getting a boost with a creative deal for the project’s financing package.

The project is slated to create 164 apartments, of which 162 would be affordable residences, according to documents on file with state officials.

The affordable housing development is slated to be built at 2880 Alum Rock Avenue in east San Jose, city planning documents show.

In an unusual twist, real estate firm Safehold has bought the land beneath the project and is renting the land to the project’s developer, The Pacific Cos. This arrangement means that the developer can save money by leasing the land rather than pay money to buy the land.

Pacific Cos. would develop and own the apartment complex that would sit atop the land, according to Safehold.

“We are thrilled to expand our relationship with The Pacific Cos., and to play a role in meeting the significant unmet demand for affordable housing,” said Steve Wylder, a Safehold executive vice president and head of investments.

The project’s total value is $98.6 million, according to documents on file with the California Tax Credit Allocation Committee, a panel within the state Treasurer’s Office.

The 162 affordable homes would be set aside for households whose annual incomes are 30% to 70% of the annual median income for the area.

In Santa Clara County, the area median income for a household of four was $184,300. This indicates the income targets for the project’s affordable homes would range from about $54,400 to $126,900 a year.

Safehold’s ground lease program helps developers assemble a creative financing package for an affordable housing project. A ground lease allows the developer to build an affordable housing package that makes financial sense in costly regions such as the Bay Area.

“This is especially valuable in higher-priced markets such as Northern California with higher rents and capital costs for construction,” Safehold stated.