Recently completed financing at two housing developments in San Ramon's Gale Ranch neighborhood by the national multifamily financing company Walker & Dunlop marks its first foray into the San Ramon Valley, with the two properties and the city itself landing on the company's radar due to a number of attractive features.
Members of the company's Affordable Team, led by managing director Jeff Kearns, secured $46 million in financing for the 256-unit Falcon Bridge development and $23 million for the 186-unit Valencia development in a deal that was announced on Feb. 8.
"As incomes fail to keep up with rent increases and the supply of affordable multifamily options remains limited, the nationwide demand for affordable housing continues to increase," Kearns said in the announcement. "We are confident that this community will continue to provide a high-quality living for working families in this growing market."
Kearns told DanvilleSanRamon that while the move was the company's first in San Ramon, the city and other portions of the Tri-Valley had been on their radar for some time, given their existing presence in the Bay Area and East Bay.
"We're active in the East Bay already, so San Ramon was kind of a natural market for us to keep doing business in," Kearns said.
For San Ramon and the two Gale Ranch developments in particular, Kearns said that stability and reliability made them attractive investments as well as valuable to Bay Area residents overall. Falcon Bridge is located on Copperset Road, and Valencia is on Goldenbay Avenue.
"San Ramon I think has proven to be a pretty reliable bedroom community for the East Bay and the Bay Area in general," Kearns said. "The cost of housing is so high as you get close into San Jose and San Francisco and Oakland MSAs (metropolitan statistical areas), and a client of mine was an early entrant into the San Ramon market and built out a large portion of that Gale Ranch community. And I think whether they were ... smart about predicting the future and how folks would need a submarket that's affordable to them and still have not too far of a commute into town for work."
For Gale Ranch in particular, Kearns said that measures aimed at ensuring affordability and the partnership of the city were particularly key factors that set Gale Ranch up to meet residents' needs and ensure stable occupancy.
"I think the biggest draw was the fact that they have been built and stable and performing well, fully leased for some time," Kearns said. "So when you're looking at a new loan request you look for a couple things. One is the stability of the asset over time, and this has proven to be a location that people are drawn to and occupy and like, and you don't see a lot of turnover in the project due to some fatal flaw in it."
"Stability of occupation, location and management, those are sort of the three that really drew us to these two properties," he added.
The emphasis on affordable housing and efforts to accommodate a range of income levels also put the recently completed financing into the hands of Kearns' and his team.
"When properties have a certain percentage of units that are dedicated to lower-income residents, that's when it falls into my group's area, and these had that," Kearns said.
Kearns said that the immediate benefit of the financing for the two properties was that it put them in a position to continue operating with strong tenancy and management as the location continues to serve the needs of Bay Area residents.
"It ensures the integrity of the asset by putting in some low-interest, fixed-rate debt," Kearns said. "It really supports the business plan for the owner to provide quality, well-maintained properties. Over the long term that's their goal, and so by transacting these loans when they did it really helped put the property on good footing for the long term operationally."
While the news is exciting for Kearns' team, as well as the owners and operators of the two Gale Ranch properties, he acknowledged that multi-family financing and the mission of his team can be a somewhat opaque concept to laypeople.
"My kids never knew what I did for a living, and so I tried to liken it to a loan that you get for your house in the same way owners of apartment buildings need a debt to acquire, to build, and to refinance their properties in order to maintain them and operate them and provide the living experience that the renter needs."
In the current housing market, Kearns said that some investors were particularly interested in properties with income-restrictions and other affordability measures, for the same reasons Walker & Dunlop had been drawn to Gale Ranch.
"Because there's such a demand, and arguably a supply and demand imbalance for apartments -- there's not enough of them and people need them -- that people know that they're good investments, that they're interested in lending money to a lot of apartment owners," Kearns said.
"Building apartments that have affordability restrictions on them is a big business, because again there's so much need. It's made up among both nonprofit developers and developers that like to make a profit, and so we created a group within our larger organization to cater to this particular universe of developers, the ones that are targeting affordable housing deals," he continued.
While San Ramon hadn't necessarily been a target for Kearns and his team, he said that the experience with the two Gale Ranch properties had put the San Ramon Valley and surrounding area keenly on their radar.
"We're very bullish on it and know that it's a great market now and will continue going forward," Kearns said.