Global plans to build approximately 350 units, beginning construction toward the end of 2003 and finishing sometime in 2005, says broker David Casper of Grubb & Ellis. Casper and partner Michael Shustak represented the seller of the land, while David Louie of CB Richard Ellis represented the buyer.
Casper says many prospective buyers passed on buying the land because they considered the parcel "undesirable." He tells GlobeSt.com that builders of market-rate apartments, for example, rejected the site because they didn't think the configuration of the land parcel and certain other factors, like its proximity to planned L.A. Unified School District sports playing fields.
"There was also a fear that the land had toxic issues, but it turned out to be clean," Casper tells GlobeSt.com.Casper says the buyer will build the apartments using federal tax credit financing and/or low-interest loans available through the state of California for such projects. Both methods provide low-cost financing that enables developers to build projects that pencil-out at lower rents than market-rate construction.
Hardly any affordable apartments are built in Southern California, except for a few small projects by non-profit groups and an occasional larger project by developers who specialize in navigating the complexities of federal tax credit financing to build affordable units on a for-profit basis.
Most developers shun tax credit financing because of the red tape involved and the high degree of specialization required to develop a tax-credit project. Developing affordable apartments on a purely market basis is impossible in Southern California, developers say, because land and construction costs are too high to make it profitable, so nearly all apartments built in the region in recent years have been targeted toward the high end of the market.
But demand for affordable apartments is huge, experts say, because working class renters represent by far the biggest and fastest-growing portion of the region's population.
Casper says he expects to see more affordable development deals in in-fill locations like downtown because of the huge demand for affordable housing.
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