ARC Plans for Most Affordable Housing to Be on Site

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Dan Ramos discusses the previous project during a January 2016 Vanguard Event

Among the concerns that some critics of the Aggie Research Campus project had was that the applicant left open the possibility that affordable housing for the project would be off-site, funded through in-lieu fees.  However, in a wide-ranging interview this week with project manager Dan Ramos, he announced that most of the affordable housing would be on-site.

Dan Ramos said that the project will have more affordable housing than any other project in town and he added that will be in the baseline features and most of it will be on-site.

As the ARC project traverses through the commission process, Dan Ramos sat down for an interview over Zoom with the Vanguard that covered a wide range of topics.

Earlier in the week, the Finance and Budget Commission began their analysis of the EPS (Economic & Planning Systems) report which had found that the project would net about $5.4 million in ongoing annual revenue, with a $2.2 billion impact for Yolo County.

“The EPS report was very positive,” Ramos said.  “I think it clearly shows there’s a substantial benefit…  Our development can bring a lasting impact to the income stream for a long time.”

He also believes that, given the economic downturn, “now is the time.

“We are in some very uncertain times right now,” he said, noting the Chamber survey finding a large percentage of businesses with revenues far down.  “We have to work hard to get out of this thing.  This would set the stage to be very helpful for the city of Davis.”

He noted that Greater Sacramento is playing a bigger role and ARC’s development team is in talks with the university.  “They do have an interest in this project.  We look forward to a relationship with them in terms of tech transfer.

“A lot of players at the university are developing technology right now and want to transfer it out to the private sector,” he said.  Some announcements, he said, would be rolled out in the near future.

But all this is contingent on what he said, “getting in the game.”  Without the entitlements, none of this will be possible.  He said, “We bring a great project to a great property with a lot of amenities to the city of Davis that a lot of these business parks across the country don’t do.”

He has rolled out a pledge for 100 percent renewable energy at the project.

“Nowhere, that I know of, anywhere in the country, has anybody made that commitment,” he said.  He believes that will be a huge challenge for them and their users, but it gets to the theme that they are trying to be a very sustainable project.  “We think we will be able to attract those companies that support those goals, that are into sustainability.  Those are sometimes very big, good companies, that have that mindset to do that.”

Many are wondering what impact COVID will have on the project.

Dan Ramos noted that the COVID situation has not impacted their interest in moving forward with the project and, if anything, they are starting to see evidence that people in Davis believe this project is even more important because of the economic uncertainty.

“We like this thing coming out of COVID,” he said.

The timing of when this could conceivably come online is also important.  Dan Ramos pointed out even if the project were to get approved by the voters in November, all of the engineering and approvals will take several years.

“We’re going to be well beyond recovery time to be able to launch at the right time,” he said.  He noted that there are going to be a lo of opportunities going forward.  “We’ve seen the tech community has really done well through this…  We are a great extension of a place to come locate to continue their efforts.

“We’re really bullish,” he said.  “We see it with the proximity to the university.”  He noted that many companies love to tap into the university and they are in a prime position to do just that.

“That’s why the location works,” he said.  “Davis has a chance to really take advantage of the rebound and be a real leader out there.”

A big question that is constantly raised is what the commercial demand is like.

Dan Ramos pointed to the existing inventory of commercial sites.  For instance, he has property throughout town, especially along Second as well as Mace, and he said pretty much all of that is leased up.

“The vacancies are less than five percent of our existing product,” he said.  He said there is a really good company that is in Davis that will be moving to the Nugget site—though he cannot formally announce it just yet.  “That’s going to gobble up a lot of our space. We’re down to about 10,000 in all of our inventory in Davis.

“We are out of space and we’re out of land also,” he said, noting that the Nugget corporate headquarters was the last of their space.

The news out of Aggie Square also seems positive.

Dan Ramos noted that they are largely medical-based, “and we’re a lot broader in terms of what we want to be able to attract here.

“This advance manufacturing … the ability to take some of the technology and not only have the R&D facilities but to be able to manufacture high end products,” he said, and this is high-end stuff—computers and nano-technology, “if they can manufacture… those are big wins for Davis in the sales tax if they sell from that site.”

There have been concerns that the employees working at the site will create a new demand for the housing.  As the SEIR notes, the project will have 850 on-site units, it will create a demand for 1200 or so in Davis that are off-site and another 1700 or so that commute from out of town.

Some are worried that this means this will create an additional demand for housing, but Dan Ramos believes that the housing demand, given the gradual build out over a period of years if not decades, will be subsumed within the normal course of housing in the coming housing element processes.

Dan Ramos noted the new downtown plan will give Davis the ability “to densify the downtown.

“I think there is going to be a reboot at looking at the General Plan,” he said, and that will give Davis an opportunity to look at housing that stays within their space limitations.

But he also pointed out that “hopefully it will be an employment center for some of the existing people that live in Davis who commute out of Davis.”  Right now, if you don’t work at the university or a few companies around town, for high quality jobs you are headed out of town to Sacramento, Roseville or even all the way to the Bay Area.

“Hopefully we can help provide some job opportunities for some of the people who are commuting out of town right now,” he said.  “Those jobs aren’t (in Davis) so they’re commuting away.”

He believes this would help the university “in supporting their mission,” helping to create a good quality of life to support the university when they recruit.

“We want to be able to answer the question—when a company comes in, where do my people live?” he said.  “We’re not going to be able to supply housing for the entire thing there but I believe the way we set it up that we have a really good opportunity to match up these jobs to this housing.”

He also pointed out, “We have to build quite a bit of commercial space before we can build our first 100 (housing) units.”  It is one unit for every two thousand feet of commercial space.

Typically, he explained, housing can help finance a project like this.  But they are actually not doing it that way.

“Housing can get built faster and absorbed faster and therefore take on a bigger burden of infrastructure costs in return for it,” he said.

But that’s not what they did in this project.

By phasing the housing, they actually delayed the build out potential by committing to build commercial space first.

“We understood that was an issue up front and we wanted to try our best to match it up,” he said.  When you do it the other way, “you can build it, sell it, absorb it and pay for infrastructure faster.”

Dan Ramos said that soon their baseline features, which they have been negotiating, will be out.

“We will be committing a significant amount of affordable housing—more than anyone has ever committed to in the city,” he said.  “We are going to commit to building a significant amount of that on site.”  He said, “We’ve heard loud and clear that that’s an important part of what we do.”  He said that will be in the baseline features.

One of the big questions is whether UC Davis will support the project—which some see as make or break for its ultimate success.

“We are in talks with them,” he said.  “Yes, I believe some kind of commitment to support from them (will come) in some kind of formal fashion.”

—David M. Greenwald reporting


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About The Author

David Greenwald is the founder, editor, and executive director of the Davis Vanguard. He founded the Vanguard in 2006. David Greenwald moved to Davis in 1996 to attend Graduate School at UC Davis in Political Science. He lives in South Davis with his wife Cecilia Escamilla Greenwald and three children.

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14 thoughts on “ARC Plans for Most Affordable Housing to Be on Site”

  1. Alan Miller

    “We like this thing coming out of COVID,” he said.

    I like so very many things coming out of Covid-19.

    Dan Ramos said that soon their baseline features, which they have been negotiating, will be out.

    I outlined the three alternate transportation features that are necessary for the support of Alan C. Miller (in article by quest from BTTSC a few day ago).  That’s my negotiation.  They are all quite reasonable and doable . . . so no squirrely “we’ll work the details out after the vote” cr*p, OK?  We’ve been there before, no trust without verification this time.  Baseline.  Period.

     

  2. Alan Pryor

    It is one unit for every ten thousand feet of commercial space.

    The EPS Financial Report and all other reports to date state that the proposed residential buildout rate of 850 units will will be 1 unit/2,000 sq ft  and not 1 unit/10,000 sq ft as stated in the article. At a project size of 2,600,000 sq ft of commercial space, 1 unit per 10,000 sq ft would only result in 260 resideintial units being built. Obviously the buildout rate of 1 unit per 10,000 sq ft is not a true statement.

    But at a buildout rate of 1 unit per 2,000 sq ft, that would result in 100% of the residential units being completely built out when only 1,700,000 sq ft of commercial spaceis built – or only 65% of the project.That is, Phases 1 & 2 of the of the 4-phase project would result in 100% of the housing buildout and none would occur during Phases 3 & 4.

    Since housing is far more profitable to build out than commercial space, this results in inflated returns to the developer in Phases 1 and 2 (when 100% of the housing will be built) and reduced returns to the developer when Phases 3 & 4 will be built (without housing). In fact, according to EPS, Phases 3 & 4  (without housing) will result in returns to the devloper well less than commericially viable returns.

    Several commenters on this fact stated that given this lower projected retun on the last 1/3 of commercial buildout only (without housing), there is no guarantees that those last 2 phases (i.e. Pahses 3 & 4) of the project would ever be built and the developer would just stop the project until market conditions completely changed or he could go back to the voters in 10 or 15 years and go, “Oops, my bad.  I can’t ever complete the project given the projected returns and if you ever want the rest of the project completed, you (the voters) are going to have to give me more housing or just live with the big bare pieces of ground.

    The EPS report projected the unleveraged/leveraged return of Phases 1 and 2 (with housing) will be 14%/22% and 17%/28%, respectively. This is above the minimum threshhold rates of return normally required by bankers to finance projects (of 10%/20%) indicating these projects could probably get financning to proceed. But the returns drop in Phases 3 & 4 (without housing) drop to 9%/15% and 9%/12%, respectively.

    Why would the developer ever proceed to finish the project if they could not get the necessary financing. The solution is obvious. Make the developer commit to building only 1 residential unit for every 3,000 sq ft of commercial developemnt (2,600,000 sq ft of commercial space /850 residential units). This would ensure the necessary return are there to provide incentive to the developer to finish the project (i.e. finish Phases 3 & 4). According to EPS, the net total project returns would still equal 13%/23% which is sufficient for the whole project to move ahead.

    1. Ron Oertel

      ince housing is far more profitable to build out than commercial space, this results in inflated returns to the developer in Phases 1 and 2 (when 100% of the housing will be built) and reduced returns to the developer when Phases 3 & 4 will be built (without housing). 

      This is something I’ve brought up multiple times, although I hadn’t realized that ALL of the housing would be built during the first two phases.

      The proposal should be analyzed as “complete” after the first two phases, regarding the fiscal “profit”.  And it should (now) include the impact of (whatever amount of Affordable housing is included) in that “profit”.  (I understand that Affordable housing is generally not subject to property taxes.)

      Beyond that, the need (and ongoing cost of) the additional 1,200 residential units (that would not be included in this proposal) should be included in the fiscal analysis.

      This would provide a more accurate picture of the claimed fiscal profit, which is supposedly the reason for the proposal in the first place.

       

      1. David Greenwald Post author

        But both of you are missing a key point – by the fourth stage, they will have built out all of the infrastructure. It’s then just a matter of filling in spaces for commercial entities. The driver for that is not going to be the developers and their costs, but rather the city and the region and their ability to recruit.

        1. Alan Pryor

          But both of you are missing a key point – by the fourth stage, they will have built out all of the infrastructure. It’s then just a matter of filling in spaces for commercial entities.

          If that were true, then why do the EPS numbers show that the returns are so low for the 3rd and 4th phases. Sounds to me like the infrastructure costs for Phases 3 and 4 are NOT paid for in Phases 1 and 2 as you infer. There certainly is no commitment for that by the developer anywhere that I can see. Do you have that in writing anywhere or is this just a guess?

          1. David Greenwald Post author

            For example, Mace Ranch was all built out, there were a few commercial spaces available and about the last one was filled by Nugget. Seems like they still had the incentive to do so long after the housing was built and it was pretty momentous for the community

    2. Ron Oertel

      Forgot to mention – the fiscal analysis notes that the need for another hotel (in addition to the brand-new Residence Inn, across the street) would not be generated until sometime after the first two phases, as I recall.  So, scratch that from the fiscal analysis, as well.

      I have no idea what David is talking about regarding the “fourth stage”, since it appears that this essentially won’t be reached.

    3. David Greenwald Post author

      “The EPS Financial Report and all other reports to date state that the proposed residential buildout rate of 850 units will will be 1 unit/2,000 sq ft  and not 1 unit/10,000 sq ft as stated in the article.”

      That was a typo on my part.  He said two thousand.  I heard two thousand.  And typed ten.  Mea culpa.

  3. Ron Oertel

    ” . . .he announced that most of the affordable housing would be on-site.”

    From the article, I’m gathering that the Affordable housing might be something more like what occurred at Nishi, rather than a land-dedication site (where an outside Affordable housing developer actually builds it).

    It was previously suggested that the Affordable housing at Nishi will be subsidized by the market-rate housing, rather than obtaining external Affordable housing funds (via an Affordable housing developer). With the latter actually having an external overseer, as well – due to external funding.

    Did Ramos provide any indication regarding that question, one way or another? And, did he provide any other details regarding the proposed Affordable housing, whatsoever?

    As a reporter, did you even ask?

    1. David Greenwald Post author

      I was not provided with details but I believe there will be a land dedication site, I don’t think you can do a Nishi style affordable housing for a project like this.

      1. Ron Oertel

        Thanks for the response, although I would have just asked Ramos at the time you spoke with him.  Surely, he must have some idea regarding this basic/essential question. And it must have crossed your mind, as well.

        The wording regarding “most” of the Affordable housing being on-site doesn’t make much sense to me, especially if it’s a land-dedication proposal.  One would think that it’s either all or nothing, especially using that potential approach.

        In any case, the land-dedication route would have a greater impact on the projected fiscal analysis, vs. a Nishi-style proposal.  (Due to tax breaks, for truly Affordable housing.)

        The thought also occurred to me that they might have purposefully waited until the fiscal analysis was complete, so that they wouldn’t have to include the fiscal impact of on-site Affordable housing in the analysis.

        1. David Greenwald Post author

          How do you know I didn’t? The reality is that this was more of a sneak preview and they will have a full announcement on the affordable housing shortly.

        2. Alan Miller

          I prefer to allow people to tell their own story when I interview them.

          If you landed an interview with Donald Trump, is that how you would approach the interview?

  4. Eva Spiegel

    I continue to be excited about this project and what it will bring to Davis, and I see a developer making significant commitments to make sure it works for our community, such as having so much of the affordable housing onsite.

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