Naples is considering buying Stillwater Cove apartments in River Park East to prevent an outside developer from removing it from the city’s shrinking affordable housing inventory.

City Council, sitting as the Community Redevelopment Agency, on Jan. 9 voted to approve funds necessary to conduct two appraisals on the former 95-unit River Park Apartments at 1400 5th Ave. N. and for other due diligence, including environmental studies. Staff will provide that information to the CRA at its Jan. 30th meeting.

“We have $6 million that could be used for acquisition in the current budget that’s untapped,” Chair Ray Christman said.

He called the special CRA meeting because Connecticut-based Corridor Ventures Inc., which purchased the 11-building complex for $17.5 million in 2021, plans to put it back on the market in April. Corridor Ventures also owns the 104-unit Jade Apartments, which provides affordable rents, but that’s under contract to be sold in late February. Both were damaged by hurricanes Ian and Milton.

The 3.35-acre Stillwater Cove property in the historically Black River Park East neighborhood is prime real estate in Naples because it’s near the Gordon River and Gulf of Mexico. It was built in 1969, when the area was developed to house Black workers in a segregated community.

Christman also asked city staff to provide an update on plans for 160-190 10th St. N., a former auto shop and consignment shop property the CRA purchased for $4.9 million last February to build about a dozen affordable apartments for teachers, police officers and other workers within city limits. The CRA hired CBRE as a consultant to research affordable housing options.

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 the 70-unit George Washington Carver Apartments expires in 2037, and the 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.

It’s the second time the city considered purchasing the complex. In 2020, the CRA authorized city staff to approach the then-owner, had the property appraised and discussed a possible purchase.

The two- and three-bedroom apartments range from 776 to 876 square feet, with rents at $1,650 to $1,800. The current 28 units per acre creates a nonconforming use and due to the Federal Emergency Management Agency 50% rule, building improvements greater than 50% of value or property redevelopment require a developer to conform to current regulations, which limit redevelopment to 40 units.

Corridor Ventures is willing to work with the city, whether it’s selling the property, managing it under a public-private partnership or helping to find a developer to rebuild it with better resiliency against hurricanes.

Hagan Brown, of Corridor Ventures, said Corridor wants to sell because it wants the “best outcome” for its investors. He noted the two-story apartments were severely damaged by two hurricanes and half the apartments, the first floor, were taken off the market, but have been renovated and should be fully occupied by spring. The same occurred with Jade Apartments.

“We love the city of Naples,” Brown said. “We’ve been involved in Naples for over eight years with our other project, but because we’re an investment company, every investment we make does have a timeline associated with it.”

CBRE’s team, which includes Trinity Commercial Group in Estero, recommended Naples secure long-term ownership and control, to restrict rents to 80% to 100% of area median income and to limit the CRA’s out-of-pocket investment to $3 million. It estimates the property’s value is $20 to $22 million but could sell for $25 million.

The CRA could finance a purchase through a $20 million bond over 20 years, with $3.75 million in equity for reserve, finished repairs/rehabs and transaction costs, with a $750,000 developer contribution toward that, as well as $3 million from the CRA.

Dan O’Berski, of Trinity Commercial Group, said that assuming a 5% vacancy, the complex would generate $2 million in yearly revenues, with about $840,000 in operating expenses. He said the city’s competition would be a developer considering a gated community of 18 to 25 lots.

“You could potentially get to a $20 million valuation on an underwrite for a home builder simply to purchase this, build spectacular homes (and) sell homes for $3 to $5 million on the water in Naples,” O’Berski said.

He presented several scenarios, including a ground lease with the developer, which would seek a 9% Low-Income Housing Tax Credit and rezoning and other approvals.

River Park resident James Whittaker commended the CRA for considering a purchase, noting the area needs affordable workforce housing.

“This will give people who work for and in the city some place that they can afford to live,” Whittaker said. “I’m afraid if the other organizations come in and try to purchase that, the price range for working-class people, it’s not going to be there. They’re going to look at raising the rent price to go along with everything else that’s in Naples. People will not be able to afford that.”

Whittaker, who also is president of the River Park Association, told the CRA the community feels the same way.

River Park resident Judy Freiberg expressed concern over the city only considering the least expensive option and pointed out if rents were 80% to 100% AMI, a resident would have to make around $80,000 to $100,000 to qualify to live there.

“What it means is you’re talking about affordable housing for high-income, working-class people and not affordable housing for the people who paint your houses and work on your lawns and other working-class people,” Freiberg said. “They’re shut out of this market.”

She suggested 60% AMI, with the CRA contributing to reduce the rents, adding, “What I love is the idea of the city owning this land and putting restrictions on the ability of gentrifying this area, which will completely ruin River Park East.”