- The city of Naples is considering a debt takeout option to preserve affordable housing at the Stillwater Cove apartment complex.
- The debt takeout, estimated to cost $11.7 million, is a less expensive alternative to purchasing the property.
- The alternative option would still ensure Stillwater Cove remains affordable for essential workers struggling to afford housing in Naples.
- Some residents oppose the city's involvement, suggesting the funds could be better used for neighborhood improvements, including stormwater drainage.
The city is exploring a new option to preserve workforce housingin Naples.
Last week, city council - sitting as the Community Redevelopment Agency (CRA) - decided to look deeper into a debt takeout, as a way to ensure the Stillwater Cove apartment community remains affordable.
The CRA has discussed options for the 4.6-acre property in River Park East for a few months, since learning of the ownership's interest in selling it.
Without control over the property, city council is concerned about what will become of it.
Instead of buying the property, the city could become a mortgagor, providing bond financing to the owners to offset their capital costs, in exchange for guarantees the community will continue to offer lower-than-market rents for years to come.
It's the least expensive of the three options presented to the CRA by its real estate consultant to keep affordable housing at the site (in its current form).
The estimated end-cost of a debt takeout: About $11.7 million, said Dan O'Berski, with Trinity Commercial Group, at a CRA board meeting April 3.
That compares to an offering price of $23.5 million to purchase the property, with little wiggle room from the sellers, he said.
"I would not expect more than a million dollars off that price to purchase the property," O'Berski said.
With a lease back option, the upfront cost to the city would be even higher, at roughly $25 million, although the final cost would be less, with the city collecting $600,000 or more a year in lease payments over the lifetime of the agreement, he said.
He noted a purchase would come with borrowing costs, and more risk for the city.
For those reasons, O'Berski described a debt takeout as "likely the best option that creates the least amount of exposure for the city."
He explained how the alternative might require the issuance of a $15 million to $18 million bond, versus a $20 million bond for the purchase of the property (with an equity investment required in all three scenarios).
City council "uncomfortable" with the property's offering price
Councilman Ray Christman, the CRA's chairman, said the offering price from the sellers came in higher than the city's two appraisals. The appraisals were not disclosed.
Under state law, a super majority vote from council would be required to buy the property for greater than the average of the two appraisals. That wasn't going to happen, said Christman, at last week's meeting.
"I'm just uncomfortable with that," he said.
After much discussion by the CRA, Christman said he understood others shared his discomfort with the price tag.
"Right now, there appears to be no path forward for us to purchase the property," he said.
Instead, the CRA directed O'Berski to go back to the owners to get more details on the feasibility and financial impacts of the lender option, and to see if that option could include the right of first refusal to purchase the property down the road.
Council also asked O'Berski and CRA staff to look for community partners that might be interested in helping the city purchase and redevelop the property to offset its expense in the future, including local employers, such as NCH Healthcare, which could benefit from the housing.
During discussions, some on council argued for the need to buy the property, while others expressed the need to focus on other community priorities.
"It gets trumped by our need ... our need for improving our infrastructure and our stormwater and our drainage, to protect our residents," said councilman Berne Barton.
If the city doesn't buy the property, someone will and it probably won't be used for workforce housing, he said, but it would be redeveloped and brought up to code.
"They're going to raise it," he said. "It's going to have its own onsite drainage ... So it's going to improve that area from the standpoint of stormwater."
By not purchasing the property, the city could use the millions it saves to make other critical improvements in River Park East, including on stormwater drainage to reduce flooding, Barton said.
Councilman Terry Hutchison felt differently, saying the city should buy the property, and redevelop it, cementing its future.
"It's a unique opportunity, and it won't get any cheaper," he said. "I say, take advantage of this and buy this. Buy this property."
He said he saw it as a "phased opportunity," where the city could scrape the site, and build something better as a "meaningful step" in providing workforce housing.
"Really, you know, this thing's been under water so much, we ought to call it Stillwater Reef ... and maybe that's what we do with the cinder blocks. Build a reef ... The fish probably know it already," Hutchison said.
The CRA plans a special meeting in early May, to hear an update from O'Berski, and to consider next steps.
With the property hitting the market this month, it will have "full market exposure," O'Berski told the CRA.
So, the city needs to make a quick decision, if it wants to be involved in determining the future of the site.
Owners looking to reduce costs, risks
In 2021, Corridor Ventures purchased Stillwater Cove, then known as the Gordon River Apartments, for $17.5 million.
The decision to sell reflects a change in business and investment strategy for the owners, a real estate investment firm, mostly due to recent hurricanes – and the risk of more – in Naples.
Sitting near the Gordon River, and not far from the Gulf of Mexico, Stillwater Cove took a big blow from Hurricane Ian in 2022.
The hurricane flooded the first-floor apartments, and they remained unrentable, until restored late last year. They're expected to be fully leased soon, after the exit of short-term renters who lived in them under a temporary contract with FEMA, which recently expired, O'Berski said.
Built more than 50 years ago, the apartment complex, with 95 units in 12 buildings, is in need of significant maintenance and repairs.
The buildings are in fair to poor condition, with major systems "aging beyond useful life," O'Berski said.
He pointed out some of the deficiencies and risks with the property, and estimated necessary repairs, replacements and upgrades at $4.8 million over the next 10 years. While the buildings are "nothing beautiful," he said, they are made of concrete and "amazingly resilient."
What's on the property today is more than can be built by current code. If the site is eventually redeveloped, it could support a new workforce housing project, with anywhere from 56 to 74 units, based on the current zoning, and the selected income limits, O'Berski said.
Currently, the apartments are not rent restricted. The city is hoping to change that – and to ward off a conversion to market rate apartments, or something else.
Essential workers, from nurses and teachers to police officers and firefighters, are forced to commute from other areas to work in Naples because they can't afford to live in the city, or even the same county.
With the city's purchase or investment in the property, rentals could be restricted to those making 80% to 100%, or even less, of the area's median income, which now tops $100,000, showing the level of income inequality.
Many River Park East residents oppose the city's purchase of the property, saying they think the money could be better spent on improving the neighborhood, including drainage and roads.
During public comments at the CRA meeting, Lauren Batlle, who spoke for the community, questioned why the city would want to buy property in such a flood-prone neighborhood.
She pointed out how little of the CRA money has been spent in River Park East on projects, or improvements, over decades.
"I believe it's 1%, or maybe less than 1%, woefully, inadequate," Batlle said.
The city, she said, should be more focused on addressing the infrastructure needs of her neighborhood, rather than on buying the apartments.
"Very few people are there," Batlle said. "They're not livable, and with the next big storm, just like what happened with the last two, they're wiped out."
When the apartments are wiped out, so are their residents.
"They leave with the clothing on their back, and everything else is ruined," Batlle said.
Whenever a big rainstorm comes, she said, the entire neighborhood cringes, wondering how fast it's going to flood.
"How can we spend money on something new when we haven't fixed what's there already? It's wrong. It's just unconscionable," Batlle said. "I can't even imagine that the discussion is still taking place."
City eyed a purchase of the property in the past
The city's previous attempts to buy the property for the preservation of affordable housing fell through in 2021, when city-paid appraisals came in at $15.1 million, and the current owners offered to pay more, winning out.
Following the CRA's decision to explore a debt takeout option, long-time Naples resident Penny Taylor, a former Collier commissioner, who once served on city council, said she wasn't sure what to think about the lender idea. She was at the meeting, and heard the discussion.
Over the years, Taylor has advocated for the purchase of the apartments as a way for the city to address the shortage of affordable housing.
"This is an opportunity to solidify the city of Naples' participation in affordable housing," she said.
She has a lot of unanswered questions about how exactly the lender option would work, as an alternative choice.
"I think I need to become a little more familiar with the mortgage process and understand where it has worked and where it hasn’t worked and the reasons why it’s worked and hasn’t worked," Taylor said. "The concept, as I understand it, is at the 10,000 foot level. I would like to see real-time examples."
The community redevelopment area, overseen by the CRA, is bounded by Seventh Avenue North, the Gordon River, Sixth Avenue South and Third Street South.
Every year, the CRA captures a portion of the property taxes generated in the area to fund capital projects and improvements. The amount it gets and budgets is based on the growth of property values over time.
Council created the CRA in 1994. The CRA's goals include eliminating and preventing blight, and providing affordable housing.
