City of Naples is considering loaning Stillwater Cove $11.69 million to keep its management and preserve the 95-unit complex in River Park East as affordable housing — preventing redevelopment into a market-rate complex or gated community.

City Council, sitting as the Community Redevelopment Agency, asked its consultants, CBRE and Trinity Commercial Group, to ask Corridor Ventures Inc. if it would consider a lending option, with a right of first refusal for a potential purchase, and to determine whether the city can restrict affordable rentals to city employees as workforce housing.

“The unintended consequences of not taking action are going to haunt this community for years to come if we don’t take this opportunity,” Vice Mayor Terry Hutchison said during the April 3 meeting. “I believe that there are financing mechanisms that allow us to do this in a way where we control it and that’s what’s most important.”

Hutchison, a 7-Eleven franchisee with stores in Collier and Lee counties, said he and his employees all desire affordable housing. “Find us a path to ownership. That’s my ask,” he said.

Corridor Ventures purchased the 11-building, riverfront complex at 1400 5th Ave. N. — the former Gordon River Apartments — for $17.5 million in 2021 and plans to put it back on the market this month. It first approached the city to negotiate, but it’s also interested in lease-back and lender options. The city had considered purchasing it in 2020.

Corridor Ventures also owned the 104-unit Jade at Olde Naples apartments, which provided affordable rents, but sold it last month; a deed hasn’t been filed yet. However, sales information suggests 47 units could be converted and sold as condos and apartments and could be rented at market rate. Both complexes were damaged by flooding during hurricanes Ian and Milton and have since been renovated.

Dan O’Berski, of Trinity Commercial Group, presented the CRA with three options:

• Purchase the 4.6-acre property; the current counter is $23.5 million.
• A purchase lease back at $25 million with a ground lease back at $600,000, with 2% interest.
• Debt take-out. The city would become a lender, extend bond financing with a land-use restriction agreement and a goal of eventually purchasing it with a partner, such as Naples Comprehensive Health, between years 10 and 20.
  CRA members agreed the price was too high and the city couldn’t pay it but wanted to consider their options to ensure rentals remained affordable.

Gordon River Apartments was built in 1969, when the area was developed to house Black workers in a segregated community and has since been renovated. Stillwater Cove features 12 apartment buildings and a leasing office and laundry building. It’s managed by Corridor Ventures and occupancy has been 97%, but many were being paid for by the Federal Emergency Management Agency until about six weeks ago, O’Berski said, adding that new tenants are moving in.

“We would consider the property to be in fair or poor condition. It’s nothing beautiful,” O’Berski said.

About $4.8 million is needed to achieve key priorities, including $801,700 in immediate repairs and $1.63 million in short-term costs over five years. Key issues are compliance with the Americans with Disabilities Act, adding a retaining wall and replacing electrical panels. CBRE and TCG recommended infrastructure upgrades, such as improved drainage, roofing and HVAC elevation and completion, with repairs and replacements completed in phases to reduce deferred maintenance.

Under current zoning, it could be redeveloped into 56 units, or up to 74 units of affordable housing, with 40% rented at 65% of area median income and below and 30% between 65% and 80% AMI; Collier’s AMI is $104,300. If the city became the lender, it would cost between $15 million and $18 million, but the consultants calculated options at $20 million, the “highest potential exposure.”

“The benefit here is you have passed off 100% ownership exposure to the owner,” O’Berski said. “The downside is control. You don’t own it, so you can’t change your mind. You get one time to put your land-use restriction agreement against this and they have to live under that land-use restriction.”

The restriction ranges from 80% to 100% AMI, he said, leaving a total cost over 20 years of $11.699 million of cash flow out versus cash flow in.

River Park East residents and its homeowner association president, James Whittaker, have been coming to City Council and CRA meetings since January, when the CRA decided to negotiate their options, to oppose a purchase. Three spoke at the recent meeting.

“Our stance as a community is how can you spend CRA money to develop a project that’s in the same infrastructure that’s been ignored for decades?” Lauren Battle asked. “We’re … cringing every time a big rainstorm comes. We’re all on pins and needles, wondering how fast it’s going to flood. … The water comes right up to my back door.”

But Mayor Teresa Heitmann noted that’s the situation almost citywide, and they want to prevent a developer from coming in and building something higher and more dense. She urged Council to act so they could put deed restrictions on it to ensure it remains affordable.

Vice Chair Linda Penniman opposed any investment, citing other priorities, as did CRA members Berne Barton and Beth Petrunoff, who called it a “terrible location.” CRA member Bill Kramer wanted to pursue the opportunity, while CRA Chair Ray Christman noted that, until recently, River Park East residents favored keeping workforce housing there. He wanted more input from residents and employers citywide.

Unlike unincorporated Collier County, which has thousands of undeveloped acres, Naples is built out. Two other affordable-apartment complexes totaling 142 subsidized units in River Park West remain in the city. The affordability period for 70-unit George Washington Carver Apartments expires in 2037, and that of 72-unit Jasmine Cay Apartments expires in 2044.

A full-time worker earning $17.53 hourly, the county’s median wage, can only afford $912 rent per month with utilities, if the recommended maximum 30% of income is used for rent. Stillwater Cove’s two- and three-bedroom apartments range from 776 to 876 square feet and rent for $1,650 to $1,800.