Member Spotlight: Rose Companies Plan “Communities of Opportunity” on West Coast

5 min read

There is a “tremendous need” to preserve existing affordable housing in California, according to Jonathan F.P. Rose of the Jonathan Rose Companies. “California has recently lost one of its most important preservation tools,” Rose says, “which is the use of the four percent tax credit and tax-exempt bonds, because the state agency has said it is going to allocate this all to new construction because the need for new construction is so great.”

Preservation is cheaper than new construction in the hugely expensive California market, Rose says, and a developer can move fast on preservation. “We actually do need to also build new, but it’s cheaper to preserve existing housing and one can move quickly, and one needs to move quickly because when existing affordable housing enters the market it should be bought and put into good preservation hands.”

Rose says his company has a tool, which should prove to be a sweet spot for doing affordable preservation. “We combine private equity with Fannie Mae, Freddie Mac or Federal Housing Administration debt and so we can move very, very quickly.”

He says, of the expansion, “We think there’s space for it and a need for it,” which will focus on affordable and mixed-income housing. “We are focused in places that have the highest demand for affordable housing, and the greatest need,” says Rose.

Rose’s California/West Coast effort will use a holistic view of helping residents he calls Communities of Opportunity.

“Yes, it’s critical,” he adds. “Every single project we design is a Community for Opportunity, whether it is a renovation of existing housing or development of new construction.”

The company’s philosophy “is to integrate, on the physical side, things like a health exam room, social services room, a library, community room, exercise room, community garden: the physical infrastructure that allows us to add health and social infrastructure that can help our residents move forward with their lives and add to their wellbeing.”

New York-based Rose recently opened a new office for his company in Oakland and has hired Yusef Freeman, formerly of PGIM Real Estate and McCormack Baron Salazar to manage the new California office. Freeman’s background is in affordable housing preservation acquisitions and new construction.

“We’ll cover the whole West Coast, from Seattle to San Diego,” Rose says, focusing on places with the greatest affordable housing need, like Seattle, Portland, the Bay Area of California, Los Angeles, San Diego and the Silicon Valley.

Freeman’s experience is as a developer of affordable and mixed-income housing. And though Freeman is kind of a one-man show at the moment, Rose plans to give him support through people at his New York headquarters.

California’s Challenges
Freeman acknowledges the challenges in the California market. “Land is expensive, and so are construction costs. “It’s a challenge for developers, whether you’re doing straight market rate across the spectrum to 100 percent permanent supportive housing for the homeless. That’s why partnerships are so critical in this line of work. As with various public and private landowners across the state. We’ve been able to look at a pretty broad spectrum of opportunities that fit all the tools we bring to the table.”

And the opportunities available in California? The state’s priority on using four percent money for new construction opens the door for those kinds of projects, he feels. Paired with state credits, “that makes affordable housing doable with less soft money.”

Though the Oakland office has only been running for a matter of weeks, Freeman says there are projects already in the pipeline, mentioning surplus land and early phases of design. “We are actively competing in public/private partnership deals both in northern and southern California,” he says.

Freeman says Rose will use a variety of finance sources on its projects, including Low Income Housing Tax Credits, state credits, state bonds, traditional debt and private equity.

Need for Affordable/Mixed Income
The sweet spot Rose sees is his firm’s specialty in both affordable and mixed-income housing, something he thinks is underused in the California market.

The current disruption in the markets caused by Coronavirus hasn’t really affected affordable housing in the state, though social distancing protocols may cause some delays, Rose says.

Rose has developed two different transit-oriented developments (TODs) around one SEPTA station in Philadelphia, for instance (TCA, April 2020). Paseo Verde is located one block east of Norris Homes, a Choice Neighborhoods Initiative, which also is a Department of Housing and Urban Development RAD (Rental Assistance Demonstration) project.

The firm owns or manages 15,000 units of multifamily real estate and has developed or acquired $2.5 billion worth of properties. In addition to California, Rose Companies has offices in New York, Connecticut, Colorado and Ohio.

Rose does have another operation in California, but it is in a different space than the new operation. Rose Community Capital, based in Manhattan Beach, is a Federal Housing Administration (FHA) underwriter, serving third parties, and has just launched a new partnership with a bridge capacity “so we can help people borrow immediately and then bridge to a FHA loan.” The unit does business all over the country but has a big focus in California, Rose says.

Rose Companies also owns and manages five assets in southern California, all of them project-based section 8 senior affordable housing properties.

One of them, the Golden West Tower Apartments in Torrance, near Los Angeles, was just acquired this February in a joint venture. According to news reports, the 180-unit senior project was sold for $74 million and will be renovated for another $10 million.

Story Contacts:
Jonathan F.P. Rose
President, Jonathan Rose Companies, New York

Yusef Freeman
California Managing Director, Jonathan Rose Companies,
Oakland, CA

Mark Fogarty has covered housing and mortgages for more than 30 years. A former editor at National Mortgage News, he has written extensively about tax credits.