One of four construction projects in the city upended by the crumbling credit market is Charities Housing’s 40-unit residential development on the corner of San Tomas Expressway and West Campbell Avenue.
Charities Housing has spent the better part of the year scrambling for construction loans, contacting as many as 15 prospective lenders with no success (see related story, page 7).
Kathy Robinson, Charities Housing’s director of housing development, said the project has been met with favorable responses, but lenders are leery of issuing loans at this time.
“There was no confidence that once the project was built, buyers would be able to get loans to buy [units], which is what they’re looking for,” Robinson said.
The project, approved by the city council in 2005, calls for 16 single-family residences and 24 townhome units on 4.25 acres of property at 511 and 555 W. Campbell Ave. The single-family residences would be sold to first-time home buyers at below-market rates.
After little success finding loans, Charities Housing has stopped soliciting lenders and will re-evaluate plans to secure funding at the start of the next year, Robinson said. Many of the attempts were made at the beginning of the year, before the recent market meltdown.
Robinson said prospects for loans are worse now than they were earlier this year.
“We haven’t gone out to any other lenders in the last two or three months just because there’s no point to it,” she said.
In January, Charities Housing will reassess the situation and see if things pick up again after the federal government’s bailout package takes effect. Robinson is hoping that loan prospects will increase at that time.
Meanwhile, one of the project’s construction permits has expired, and another is set to expire on Nov. 15. Robinson visited the planning commission on Oct. 28 for a recommendation that the city council reinstate and extend the permits.
Robinson said she was “disappointed” to have to come before the commission.
“The problem we’re encountering with our funding is totally related to the collapse of the overall credit markets,” Robinson told commissioners.
“We are optimistic that as soon as things turn around, we’ll be able to find a construction lender that will be able to lend to us and we’ll be able to get started,” she continued.
Because Charities Housing has kept city officials up to date on its situation, commissioners were sympathetic and unanimously recommended the city council approve the reinstatement and extension.
They were slightly concerned, however, with the construction activity of the site since the project has stalled. The land is owned by the Santa Clara Valley Water District, which is currently installing three well buildings on the property, one of the stipulations of the project.
At the meeting, city planner Tim Haley noted that the site could remain idle after Valley Water finishes the well project, saying, “We have little say in regard to how that site is developed under a separate district.”
Charities Housing is in the midst of acquiring the property from Valley Water with a $4.5 million purchase agreement through the Campbell Redevelopment Agency. Redevelopment manager Kirk Heinrichs said he expects the agreement will have to be extended.
“[Charities Housing] is not going to be able to acquire the land until financing is available, which is a year or two down the road,” he added.
Robinson said the majority of the funds for the land purchase have been secured, but lenders would not release the funds until developers show they can finance the entire project. Including the land purchase, the total cost of the project is $25 million.
With the planning commission’s recommendation, Robinson said she is confident the city council will approve the permits.
