Friedrich Refrigeration building located on East Commerce Street. Photo by Scott Ball.
The Friedrich Lofts apartment complex would be located behind and next to the historic Friedrich building on East Commerce. Credit: Scott Ball / San Antonio Report

Despite multiple San Antonio residents urging the San Antonio Housing Trust Public Facility Corporation (PFC) board to delay approving a mixed-income housing development in District 2, board members approved the proposed project Monday.

As approved, the Friedrich Lofts development now includes a slightly higher percentage of affordable housing units than it did when the PFC delayed approval last week, thanks to a compromise hammered out between the San Antonio Housing Trust and the development team.

But like several other public commenters at a Monday PFC meeting, Judit Vega criticized the board, which is currently made up of five City Council members, for bringing back the Friedrich Lofts proposal for a vote the day before four new Council members are to be sworn in.

“I just feel like it is deeply racist, it is deeply unsettling, and also just a lack of transparency as everyone stated before, to make this vote the day before we have new Council members coming in, and we have a new District 2 Council member,” Judit Vega said. “It’s just wrong.”

The board voted to delay the project at its June 8 meeting after Councilman John Courage (D9) raised concerns that there were not enough affordable units given the area’s need. On Monday, an updated version of the proposal passed, with Courage, Councilwoman Shirley Gonzales (D5), and Councilwoman Rebecca Viagran (D3), who leads the board as president, voting in favor of it. Councilman Roberto Treviño (D1) voted against while Councilwoman Adriana Rocha Garcia (D4) abstained.

At the previous PFC meeting, Gonzales sharply criticized Courage for not supporting the Friedrich Lofts project, calling it “hypocrisy” to insist on more units priced for residents making 60% or less of the area median income (AMI) in District 2 but not raising the same concerns for a project in his home of District 9. Courage argued then that District 2 needed affordable housing more.

The PFC, a city-affiliated nonprofit, works to develop affordable housing in partnership with private companies by offering incentives such as property tax exemptions. Before he voted in favor of Friedrich Lofts Monday, Courage said he anticipates even better projects proposed to the PFC in the future.

“This is probably the last property coming to the San Antonio Housing Trust or the city that was begun years ago under previous, more developer-friendly guidelines,” Courage said. “Over the last couple of years we have really tightened all of those guidelines and made greater requests for more affordability … And I for one will continue to fight for more affordability in all our future partnerships.”

Treviño, the sole nay vote, echoed public commenters’ concerns around creating just a few affordable units in a high market value area. The proposed Friedrich Lofts, at 1617 E. Commerce St., is on the near East Side, a few blocks from Hemisfair and downtown San Antonio. Under the approved agreement, the owner of the development is exempt from paying property taxes, generally for 75 years.

“I have to agree that the cost to subsidize these units is simply too high,” he said. 

The project originally was to include 14 units priced for residents making 60% AMI, but will now have 24. There will be also be 155 units priced for people making 80% or less AMI. The remaining 179 units will be market-rate.

San Antonio Housing Trust Executive Director Pete Alanis explained that the PFC considered the Friedrich Lofts proposal Monday not as a way to circumvent the opinion of any new incoming council members, but because without immediate action, the entire project, which has been in the works for three years, could have collapsed.

If the project had not been approved Monday, the board would have lost its ability to form a quorum for several weeks, as three of its members — Treviño, Viagran, and Gonzales — leave City Council. Under the new governance structure approved Thursday, the PFC will grow by six community advisors and one city advisor. City Council isn’t expected to approve new members until August.

Given that delay, Alanis said he feared equity partner Atlanta-based American South Real Estate Fund (ASREF), who along with Dallas-based developer Provident Realty Advisors (PRA) is providing $11.8 million to finance Friedrich Lofts, could pull its funding before new PFC members are chosen.

“And then the developer, who guaranteed [the project], is left holding the bag,” Alanis said. “Then … the land would also then revert back to the original property owner, as part of the agreement, because he didn’t get paid the remaining amount at closing.”

Though current Councilwoman Jada Andrews-Sullivan (D2) was supportive of the Friedrich Lofts project, incoming District 2 representative Jalen McKee-Rodriguez said he was disappointed by the PFC’s action. 

“I don’t think that this project meets our affordable housing needs,” he said. “You know, 24 affordable units out of [358] doesn’t even begin to address the disparity that exists in D2 and the needs that we have for affordable housing.”

He emphasized that he does not consider housing priced at 80% AMI as affordable, and would like to see more projects in the future that prioritize units at 60% AMI or lower.

“I don’t think the PFC has historically gotten us the results that we wanted, but … I want to look at that process as a whole,” McKee-Rodriguez said. 

“I would say at least 50% of the units, should it be at 60% or below [AMI] and I would even go below that … but there’s going to be a conversation,” he added. “Developers are gonna want to be a part of that conversation, other council members in their districts are going to want to be part of that conversation.”

While Alanis said he understands the community’s need for affordable housing targeted at people making 60% or less AMI, he said, “we don’t have the financial tools to be able to do that” for this project. He noted that the property has been sitting vacant for 31 years. City Council approved an incentive package for the project in 2018, and the PFC acquired the property from John Miller of Dallas in 2020, who bought it two decades ago.

“With Friedrich, we needed a baseball bat type of financing to get it to work,” Alanis said. “And that’s what the PFC tool is. It’s a big tool that should only be deployed in certain instances where there’s an overwhelming challenge in redeveloping that property and that there’s a community need that the PFC fund toolkit can provide.”

In order to pay for the additional 60% AMI units, Alanis said, “We will be reducing our equity position by about 5%, which will cover the costs of those extra 60% [AMI] units, and in return we are getting transaction fees through the life of the lease.”

That means whenever the property is sold, the PFC will receive a portion of the sale, which was not guaranteed in the deal’s previous incarnation. Under the new terms, the project should bring the PFC a higher return, which can then be invested in other affordable housing projects.

Jackie Wang covered local government for the San Antonio Report.