The $68.7 million redevelopment of the former Friedrich Air Conditioning complex on the near East Side, known as Friedrich Lofts, took another step forward this week when a city board, composed of five San Antonio council members, authorized the purchase of the property sooner than planned. Though the deal isn’t final, the purchase now gives the Friedrich, which has sat derelict for decades after numerous attempts to rehab it, the best chance for success, local officials said.
The 347-unit Friedrich Lofts project at 1617 E. Commerce St. is being lead by Dallas developer Provident Realty Advisors in partnership with the San Antonio Housing Trust Public Facility Corp. (PFC) and Atlanta-based investor American South Real Estate Fund.
» 173 market rate units — average 873 square feet, avg. $1,563 monthly rent
» 160 at 80% area median income (AMI) — avg. 879 square feet, avg. $1,379 monthly rent
» 14 at 60% AMI — avg. 874 square feet, avg. $842 monthly rent
Source: San Antonio Housing Trust
Editor’s note: For a complete AMI breakdown by household size, scroll to the bottom of this post.
The Friedrich is sandwiched between Dignowity Hill and Denver Heights neighborhoods, two of the fastest gentrifying communities in inner San Antonio. Half the units at the Friedrich Lofts (173) will be priced at market-rate rents, 160 units priced for people making 80% of the area median income (AMI) or less, and 14 apartments priced at 60% AMI.
The San Antonio Housing Trust PFC brings to the partnership a full property tax exemption afforded to governmental nonprofits (or PFCs) under state law in exchange for half the units priced for people making below the area median income, or AMI. This year the Bexar Appraisal District appraised the five-acre property at $2.1 million, and concludes $61,622.39 is owed in property taxes to local jurisdictions.
The American South Real Estate Fund, meanwhile, is contributing $10.9 million in cash.
Provident has applied for a $54.8 million U.S. Department of Housing and Urban Development (HUD) 221(d)(4) loan via Greystone of New York, but additional environmental assessments, such as ground water and soil testing, is being required by the Texas Commission on Environmental Quality (TCEQ). The Texas Historical Commission also has to approve the demolition of the buildings.
On Monday, June 15, the San Antonio Housing Trust PFC board, chaired by District 3 Councilwoman Rebecca Viagran, approved the formation of a company to purchase the property now so that the environmental work and, ultimately, the demolition of the buildings can be completed before taking the project to HUD in March 2021 for final closing.
“We recognize (the HUD closing) is not going to happen until March,” Jim Plummer, an attorney with Bracewell LLP who puts together local PFC deals, told the board. “However, HUD … has to see TCEQ has approved the environmental and the state of Texas (historical commission) has approved the demolition plan.”
American South Real Estate Fund has agree to pay for the upfront costs of the environmental and demolition work, but the group only works with nonprofits, or public nonprofit, entities, thus the need for the San Antonio Housing Trust PFC to move on ownership now, said Pete Alanis, the San Antonio Housing Trust interim executive director.
According to Alanis and Plummer, the board needed to approve the purchase of the property because the current sales contract, between Provident Realty Advisors and Dallas developer John Miller, who’s owned the Friedrich for many years, is due to expire June 30. Miller plans to retain ownership of the buildings facing East Commerce Street. It’s unclear what his plans are for those buildings.
Provident Realty Advisors will pay the San Antonio Housing Trust PFC a $350,000 fee at the imminent closing, and another $250,000 at the HUD closing in March, Alanis said.
During the meeting, District 9 Councilman John Courage said he supported the project, but called its financing convoluted. Council members Roberto Treviño (District 1), Adriana Rocha Garcia (District 4), and Shirley Gonzales (District 5) also serve on the S.A. Housing Trust PFC board.
“The city has tried five attempts to find a way to get the Friedrich rehabilitated,” Plummer told the board. “It has been unsuccessful to date. So, yes, you have seen this project many times. I think we finally have a structure that’s going to work. Yes, it’s a convoluted structure … because we are working to make sure you have no risk in an environmental remediation.”
For its part, the American South Real Estate Fund will hold 67% ownership, while Provident Realty Advisors and the San Antonio Housing Trust PFC will have 16.5% ownership each when the apartments are built. Alanis acknowledged the large ownership stake by American South Real Estate Fund, but said the investment group was the only one Provident Realty Advisors could find for the Friedrich. Part of the delay has been finding an investor willing to commit to the Friedrich, Alanis said.
“It’s the deal that is going to finally allow this project to proceed, and we’re finally going to have the Friedrich done,” Alanis said. “Otherwise, it just wouldn’t have happened.”
The project is also receiving $2.29 million in city incentives. For more details on the Friedrich Lofts, scroll down.
During the meeting, virtually all council members expressed concern that District 2 Councilwoman Jada Andrews-Sullivan, who’s district encompasses the Friedrich complex, wasn’t present at the meeting. The San Antonio Housing Trust PFC board is composed in a way that excludes the District 2 council member. Alanis told the board Andrews-Sullivan supports the Friedrich Lofts project.
Under a PFC development structure, the PFC owns the property to receive the property tax exemption and leases it to a partnership that includes the PFC. For more, scroll to the bottom of this post.
Clarification: The Friedrich complex is located just outside the Dignowity Hill and Denver Heights neighborhoods, and not inside either one as previously stated in this post.
» Address: 1617 E. Commerce St.
» Development partnership: Provident Realty Advisors (16.5% ownership; Dallas), San Antonio Housing Trust Public Facility Corp. (16.5% ownership; City of San Antonio nonprofit), American South Real Estate Fund (67% ownership; Atlanta)
» Property Owner: Group headed by John Miller (Dallas), preparing to sell to the SA Housing Trust PFC
» Occupancy: N/A
» Rent or Buy: Rent
» Height: Four
» Land size: 4.04 acres
» Total units: 347
» Market rate: 173
» 80% AMI: 160
» 60% AMI: 14
» 30% AMI: N/A
» Student Units: N/A
» Retail (s.f.): N/A
» Office (s.f.): N/A
» Parking: 771-space parking garage
» Construction start date: Second quarter 2021
» End date: Late 2022
» Architect: N/A
» Cost: $68.7 million
» Investors & Financing: $10.9 million via American South Real Estate Fund; $54.8 million HUD 221(d)(4) loan via Greystone (New York)
» San Antonio Incentives: $2.29 million
» SAWS Fee Waivers: $500,000
» City Fee Waivers: $97,670
» City Loans: N/A
» Est. City Property Tax Rebate:
» Other: $1.7 million Inner City TIRZ reimbursement
» Bexar County Incentives: N/A
» Texas incentives: Full property tax exemption via San Antonio Housing Trust Public Facility Corp. duration of 75-year lease beginning 2021. $61,622.39 owed in 2020. Expected 75-year lease.
» Federal incentives: N/A
» Other: N/A
» TOTAL PUBLIC SUBSIDY: $2.29 million (does not include tax exemption)
» Return on investment: 7%
Friedrich Lofts timeline
June 15, 2020
The San Antonio Housing Trust PFC agrees to form a company with Provident Realty Advisors to purchase the Friedrich complex ASAP.
Jan. 22, 2020
San Antonio Housing Trust PFC revises memorandum of understanding MOU with Provident Realty Advisors. Read the agenda item from that meeting.
Aug. 14, 2018
The Inner City Tax Increment Reinvestment Zone board voted to approve a $1.7 million reimbursement to the Friedrich Lofts project. For more info, read “Friedrich receives $1.7M incentive for mixed-income apartments”
5 steps to understanding public facility corporations, or PFCs
Area median income
Here are the latest area median income (AMI) levels for the greater San Antonio area (Bandera, Bexar, Comal, Guadalupe and Wilson counties), according to the U.S. Department of Housing and Urban Development. Want to know more about how AMI works? Click here.
|Area Median Income (AMI) by limit and household size|
|1 person||2 person||3 person||4 person||5 person||6 person||7 person||8 person|
|Area Median Income||$49,700||$56,800||$63,900||$71,000||$76,680||$82,360||$88,040||$93,720|