Sacramento Business Journal
Fund invests $22.7M in affordable housing
By Mike McCarthy, Sacramento Business Journal
December 20, 2004
The Nehemiah Sacramento Valley Fund has invested $22.7 million in equity during its debut year,
assisting the construction of 1,015 homes for sale at affordable prices in Northern California.
The results add up to a strong first year of investing for the fund set up by the Nehemiah Community
Reinvestment Fund Inc., a subsidiary of Nehemiah Corp.
The Sacramento Valley Fund aims to boost affordable developments in lower-income neighborhoods. Often such
projects go begging for equity, the developer's share of the project's cost required by lenders. Projects without equity
don't get loans and don't get built.
The fund has helped ventures that include Regis Homes of Northern California's ground-breaking
Ironworks project in West Sacramento, plus Pismo Beach developer Al Nevis' conversion of 527 Sacramento apartments
to condominiums, said Peggy Jones, director of Nehemiah's Community Reivestment Fund.
She has about $6.5 million more available and is looking for more projects to invest in.
The building industry, usually hard put to find equity in lower-income areas, likes what the fund is
doing. "Anytime we have a source of funding dedicated to urban infill, I'm for it," said Bob Holmes, a project manager
for Regis. "It enables you to focus on doing that kind of project and it helps more projects come to fruition."
Although investors have tended to favor real estate over stocks the past few years, he said the typical investor
still looks for the standard new-home project rather than an affordable, infill development.
Homes from West Sac to Truckee
This year, the Sacramento Valley Fund invested:
- $2.7 million in Ironworks, the $46 million, 188-home project that will be the first housing in
West Sacramento's Triangle area near Raley Field.
Next spring Regis plans to start building a mix of houses and lofts for sale, plus 16 rental
units. Ironworks would offer homes at an average price of $274,883, Jones estimated.
- $3.9 million in Nevis' $13.8 million conversion of the Alder Grove Apartments in North Highlands into
116 condominiums. The project will offer homes averaging $146,586 in price.
The conversion started late this summer, and Jones said 63 units have been reserved by buyers.
- $4.5 million in Nevis' conversion of the Woodlake Place Apartments in Lodi into 139 condos,
averaging $172,700 apiece. The project will cost $19.3 million to build. The conversion began last month;
49 units have been reserved so far.
- $5.5 million in Nevis' conversion of the Rollingwood Commons apartments in Fair Oaks into
272 condos, averaging $205,600 each. Construction started last month and sales will begin in January Jones said.
- $6 million into developer Rick Holliday's $30 million, mixed-use redevelopment of Union Pacific
railroad's 30-acre Truckee railyard. The project is planned for 300 single-family homes and 100,000 square
feet of retail. The average price has not been set.
Holliday is pursuing development approval from the city. Jones said final approval might be at least
a year away. At that time, Holliday and the fund would sell some of the land to other developers.
The five projects, which vary in start and finish dates, would be developed between this year and 2007.
Nehemiah's For-profit Arm
Nehemiah Corp., based in Sacramento, is best known for its charitable program that gives money to
low-income families to help them make the down payment on homes.
The company also runs a separate, non-profit Community Reinvestment Fund to provide capital to projects
that revitalize lower-income neighborhoods. The reinvestment fund, in turn, started to gather capital for the Sacramento
Valley Fund subsidiary two years ago to achieve the same goal.
But the Sacramento Valley fund is also a for-profit venture that seeks to garner returns that can be pumped back
into the parent reinvestment fund, Jones explained.
To collect the $29.2 million in capital, the fund organized a coalition of nine money sources. The
Nehemiah reinvestment fund put in $3 million. Chipping in $5 million each were Wells Fargo Community Development Inc., Washington Mutual
Community Development Inc., and Citicorp USA Inc. Others invested smaller amounts.
This month the Sacramento Valley fund's parent, Nehemiah Community Reinvestment Fund, announced
that it had received a $2 million line of credit from Fannie Mae to use as loans for affordable housing projects
in Sacramento and other U.S. cities.
Jones expects the line of credit can be leveraged into $13 million in loans to help fund some $40 million
worth of work-force housing during the next few years.
The deal is important for the reinvestment fund not just for the added lending power, but because
it gives the fund more status with other funding sources, making it easier to raise more capital.
"It gives a real stamp of legitimacy,: Jones said. "No one wants to be first to risk money on a startup, and Fannie Mae
is very conservative."
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