Highland Realty Capital is pleased to announce the successful capitalization of The Union, a 110-unit apartment development located in an opportunity zone adjacent to the West Oakland BART Station. On behalf of Holliday Development, Highland sourced $18 million of joint-venture equity from New York Life Real Estate Investors and $26 million of debt from City National Bank to fund the vertical development of the project, which will also include 3,000 square feet of ground floor retail.
The units will be built off-site via Factory_OS (https://factoryos.com/), located on Mare Island in Vallejo, which is also in an opportunity zone. Facotry_OS, or “The Factory”, began operations this year as a 100% union-employed facility, making it the only viable option for developers who want to build off-site, but have a prevailing wage requirement. New York Life Investors was the natural fit for this project, as the firm is an investment manager for union pension funds.
Building the units off-site will condense the construction timeframe down to approximately 12 months, 812 months less than typical timeframes. The shortened construction period reduced the loan interest reserve requirement, along with other time-sensitive capitalized costs, thereby increasing the yield and potential returns on this investment. Most importantly, the risk of the investment is significantly reduced by putting the construction process under one roof, removing externalities such as weather, traffic, and other onsite hazards. On a risk-adjusted basis, this development offered double the return of normal apartment projects.
Highland was hired exclusively to capitalize the project on behalf of longtime Bay Area development firm, Holliday Development. Brett Mlinarich, VP of Originations, led the Highland advisory team. The opportunity received tremendous interest from a wide array of institutional investors and lenders. However, the off-site nature of the construction process ruled out the majority of players. Mlinarich added, “Despite a challenging capitalization, we commend Holliday for addressing the housing affordability issue head-on with this high-quality opportunity zone project.”
Factory_OS is a labor-backed housing manufacturing facility located on Mare Island in Vallejo, CA. The Factory vertically integrates 21st century off-site building technologies, software operating systems, lean manufacturing and progressive labor practices to deliver multifamily housing more than 40% faster and at 20% lower cost. https://factoryos.com/
About Holliday Development
Holliday Development is an Oakland-based development firm founded in 1989 that has masterfully developed urban infill housing, master plan neighborhoods, and mixed-use developments for more than 30 years. By building vibrant communities that are sustainable and cutting edge, Holliday Development has developed a portfolio of award-winning projects. The firm is led by Rick Holliday and Kevin Brown, who together have pioneered some of the most transformative developments in the Bay Area. https://hollidaydevelopment.com/
About Highland Realty Capital
Highland Realty Capital is a commercial real estate capital advisor, representing developers, investors, and owners to raise debt, mezzanine, and equity for their developments, acquisitions, refinancings, and recapitalizations. Highland’s expertise spans all product types including office, retail, residential, industrial, and hotels, as well as land. Its principals have closed more than $7 billion in transaction volume over 60 years of combined experience. The Northern California team includes Principal Jeff Eliason and VP’s Brett Mlinarich and Leland Ortega. http://highlandrc.com