A developer sees demand for construction of new luxury apartments, at below-market rents.
The lack of affordable housing is a problem. For Jeff Burns, it’s an opportunity.
His company, Affiliated Development, just paid $4.3 million for 20 parcels of land in the northwest section of downtown West Palm Beach, with plans to build an apartment complex featuring mostly workforce housing.
The 2.5-acre property, almost the entire block, is bounded by Rosemary and Sapodilla avenues on the east and west, and Third and Second streets, on the north and south.
Burns plans to build an apartment complex for working people who earn just below or above the area’s median income. According to the West Palm Beach housing and community development website, that income can range from $64,680 to $75,460 for a household of one, or between $73,920 and $86,240 for a household of two.
“We’re very excited to bring new, amazing housing at attainable rents, which is a huge need in West Palm Beach,” said Burns, founder and chief executive of Fort Lauderdale-based Affiliated. “People should be able live comfortably within their means and also live in a beautiful project.”
The city’s growth is what got Burns interested in doing the deal, even if it meant cobbling together nearly two dozen properties from several different owners. The sales all closed on June 14, according to Palm Beach County property records.
Burns said the land was attractive for several reasons. It’s a couple of blocks from the Brightline passenger rail station; it is near the police station and courthouse complex, which are major sources of employment; and it is close to a new planned office tower, 360 Rosemary at Rosemary Square, the mixed-use center formerly known as CityPlace.
Nearby Clematis Street, and the revitalization of the historic Sunset Lounge jazz venue, also attracted Burns to the area, he said.
Affiliated’s interest in building workforce housing comes at a time when rents on newly opened apartment buildings downtown are sky-high. Rents at new buildings such as Park-Line, The Alexander and Broadstone City Center are at $2,000, $3,000 and more per month, putting these luxury residences out of reach for many would-be renters.
Burns, a self-described data junky, said a city trying to attract businesses and a competitive workforce needs a range of housing options. “We don’t believe the answer to just go buy a C product and fix it up with countertops,” he said. “We believe in developing a nice, Class A product that rivals some projects charging a much higher rent.”
How to finance luxury apartments at below-market rents?
Affiliated Development’s website touts its expertise in tapping government, community and non-profit sources of money to help build apartment projects. In addition, the company says it has experience in private and public finance.
Burns said it’s too early to talk financing on the West Palm Beach apartment project, although he said just about every deal the company does is a public-private venture.
In Lake Worth Beach, Affiliated will break ground later this summer on the MID, a 230-unit luxury apartment complex planned for 1601 N. Dixie Highway. Affiliated was successful in obtaining public money incentives for the project. It qualified for a $1 million city incentive for infrastructure improvements and $1.4 million in property tax abatements through the city’s Community Redevelopment Agency.
The MID will not contain workforce housing, but the rents will be lower than in nearby, pricier cities, Burns said. For instance, a one-bedroom apartment will rent for about $1,200 or $1,300 a month, which is roughly $800 a month less than what some new one-bedroom apartments in West Palm Beach charge.
Affiliated also is building an apartment complex in Fort Lauderdale, and this one will have 142 workforce housing units. The property, at 613 Northwest 3rd Avenue, obtained a $7 million grant from the CRA, as well as $19.3 million in bank financing. The property also is in an Opportunity Zone, a program allows investors and developers to defer some of their capital gains taxes by investing in distressed areas.
New apartment projects planned for West Palm Beach have been required to include some units with rents priced below market. For example, about 15 percent of a 300-400 unit apartment tower planned atop the former Macy’s department store at Rosemary Square will consist of workforce housing. Workforce lease rates would range from $1,443 to no more than $2,201 per month.
In addition, a 178-unit apartment complex approved for the Warehouse District, southwest of the downtown, will feature 36 workforce housing units.
But Afffiliated plans to devote most of its West Palm Beach apartment toward workforce housing, with the rest available for lease at market rents. Burns said it’s too early to know how exactly many units will be built although he said 400 units is possible.
In addition to providing workforce housing, the Affiliated Development deal in West Palm Beach is notable for another reason.
It pushes growth outside the city’s core and into areas that haven’t seen new investment in a long time. This part of West Palm Beach, dubbed the Northwest District, is a historic part of town that has been identified by the city’s Community Redevelopment Agency as a key area for growth.
The 1930′s-era Sunset Lounge, at 609 8th Street, is undergoing a $4.5 million renovation by the CRA. The goal is to transform the site into a African-American cultural tourism destination. In the 1940s and 1950s, the famous jazz venue drew artists such as Ella Fitzgerald, Count Basie and Louis Armstrong.
The Affiliated transaction brings to mind the numerous parcels assembled more three decades ago to form the site that became CityPlace. The mixed-use project, in a once-blighted part of town, kicked off the city’s renaissance when it opened in 2000.
Affiliated Development’s deal is much smaller, of course, but still it required careful planning. It was in the works for months and consisted of several property owners, according to Touchstone Webb Realty Company’s Kris Hustad, who represented four different sellers. Anthony Fasano of Whitaker Realty represented Rosemary WPB LLC, the Affiliated entity that purchased the properties.
Alexandra Clough writes about real estate, law and the economy.