Partnership targets office conversions and new construction
About 15 development sites already in the pipeline
Tax credits, tax-exempt bonds to help finance projects
Korean American real estate developer Jamison is partnering with Kennedy Wilson to develop more than 4,000 affordable housing units across the Los Angeles area, launching a major pipeline that will include both new construction and the conversion of underused office buildings into apartments.
Jamison will pursue the projects through Arden Residential, its newly established affordable housing division, in partnership with Vintage Housing, Kennedy Wilsonβs affordable housing joint venture.
The partnership has identified roughly 15 potential development sites, most of them in the city of Los Angeles. The companies eventually plan to expand their affordable housing efforts throughout Los Angeles County.
Garrett Lee, chief executive of Jamison, recently told the Los Angeles Business Journal that affordable housing was a sector the company had long wanted to enter, citing the enormous need and demand for lower-cost housing in the region.
The initiative marks Jamisonβs first major push into developments consisting entirely of affordable housing.
Kennedy Wilson brings substantial experience in the sector. The Beverly Hills-based real estate investment company acquired a stake in Vintage Housing in 2015. Since then, Vintageβs affordable housing portfolio has expanded from about 5,000 units to approximately 13,000 units across the western United States.
Kennedy Wilson currently owns about 45,000 residential units, including roughly 15,000 affordable units.
The partnership also comes after former Jamison Chief Executive Jaime Lee joined Kennedy Wilson last month as a senior managing director of capital markets and real estate investments, adding another connection between the two companies as they expand their affordable housing activities.
To finance the developments, the partners plan to rely heavily on the federal 4% Low-Income Housing Tax Credit, or LIHTC, program and tax-exempt bonds.
Rather than combining numerous layers of government financing programs, the developers intend to keep their capital structures relatively simple, a strategy designed to reduce costs and shorten development timelines.
A major component of the initiative will involve converting existing office properties into residential buildings.
Los Angelesβ Citywide Adaptive Reuse Ordinance, which took effect in February, is intended to make it easier to convert underused commercial buildings into housing by streamlining approvals and providing greater flexibility for adaptive reuse projects.
The partnershipβs first major project is the conversion of the former Los Angeles World Trade Center(Picture) at 350 S. Figueroa St. in downtown Los Angeles into an affordable housing complex called Sky Castle.
The roughly 400,000-square-foot office property is being transformed into 512 affordable housing units. The first phase, which began this summer, will create 241 units, followed by another 271 units in the second phase.
The developers also expect to break ground on more than 500 additional units within approximately six months. Their initial focus will be on urban locations with convenient access to jobs and public transportation.
The 4,000-unit pipeline comes as Los Angeles continues to struggle with a severe shortage of affordable housing while high construction costs and financing rates make conventional ground-up development increasingly difficult.
By combining office-to-housing conversions with new construction and federal affordable housing incentives, Jamison and Kennedy Wilson are betting that underused commercial properties can become an important source of new housing across Los Angeles.
