Luxury apartments, built in the midst of Salt Lake City’s homeless crisis, prove to be a smart gamble

Developers of new luxury apartments who bet big on a tarnished western edge of downtown Salt Lake City appear to be winning.

The transit-oriented Alta Gateway Station project at 505 W. 100 South went up one block away from what was then the epicenter of Utah’s homelessness crisis, spilling out of The Road Home shelter.

As construction crews for the Denver company Wood Partners first dug into the former warehouse land west of The Gateway Mall in summer 2015, the shopping center was bleeding retailers and looked like it was nearing bankruptcy.

Another Utah-based developer, Cowboy Partners, had apartments going in near The Gateway around that same time — based on a leap of faith in new mall ownership and what were then city promises to better address shelter overcrowding and an upswing in street crime in the neighborhood.

But Alta Gateway Station was that one crucial block further west, said Tim McEntee, director with Wood Partners — and several notches up in nerves for investors.

“We were definitely pushing the margin out here,” he said. “It was a challenge, but we thought the market was ready for our kind of product.”

Today, the swanky westside apartments are leasing up, with over 80 percent of 277 units filled. Studios start at $1,100 a month; three-bedrooms go for $2,700 and above. Sixty percent of residents already settled in are from out of state, manager Steve Steck said. About a third work at the thriving downtown Salt Lake offices for investment banker Goldman Sachs, which also helped finance Alta Gateway.

With its high-end features — including a secluded outdoor pool — the project is the first multi-family apartment building in Utah to win a LEED Platinum certification. That’s the highest rating offered by the U.S. Green Building Council, awarded for environmentally sensitive building standards and practices ranging from energy efficiency and low water usage to sustainable materials and indoor air quality.

A few months before, Alta Gateway won the Utah Apartment Association’s best development of the year award, based in part on glowing accounts from reviewers secretly posing as would-be renters.

Now, with the prospect of The Road Home moving out of the area in just over a year, Wood Partners is pursuing an equally upscale second phase of 288 apartments on land just to the west.

And it is seeking tax breaks from the city to pull it off.

McEntee said capital investors are calling, “wanting to do more deals” in Utah’s capital city.

‘Get the rooftops up’

The upscale residential project, coming amid an apartment-building boom in Utah, is evidence of several trends.

One, experts say, is the Salt Lake City market’s ability to absorb top-end downtown apartments at higher and higher dollar-per-square-foot rates — even as many Utah renters are being squeezed by rents climbing further out of reach for most blue-collar and middle-class wages.

As Alta Gateway Station welcomed visitors last week, the Salt Lake Chamber warned that all supplies of apartments, existing homes and new construction statewide were dangerously strained, let alone just affordable units. The business group said the looming crisis threatens to push regional home prices high enough to dampen Utah’s economic growth.

Looked at another way, healthy occupancy for the luxury apartments also highlights the effects of Operation Rio Grande.

That three-phase plan, begun in August 2017, saw stepped-up police action to restore public safety in the wider neighborhoods around The Road Home, with some homeless jailed and others sent for medical and addiction treatment, then helped with job training, employment and housing.

The Road Home is scheduled to close July 2019. City, county and state officials are now building the first of three new homeless resource centers planned elsewhere in Salt Lake County.

Steck, who works for Wood Residential Services, Wood Partners’ property management arm, said the police and social-services campaign reduced street crime and vagrancy in the Rio Grande neighborhood to roughly a tenth of what it was just a few years ago.

“Obviously, security was a concern and it was a challenge to change some people’s perceptions,” Steck said, “But since they came and did that, it’s essentially been a non-issue.”

McEntee said Wood Partners is now eager to proceed with a long-planned second phase, in the face of proven market demand for additional luxury dwellings. He likened Alta Gateway Station and its neighborhood to residential projects in the Denver area known as LoDo, a once-rundown historic part of the Colorado capital that is now site of the city’s more in-demand eateries and stores.

“It’s amazing when you get the rooftops up — and we saw this in Denver — you get the eyes 24/7, you get the businesses in and it starts moving in the right direction,” McEntee said.

Though it owns nearly 70 properties with about 20,000 units around the United States and has been involved in building up to 66,000 dwellings total, this is Wood Partners’ first project in Utah. The company describes its niche as “luxurious living at a fair price.”

And in addition to its swimming pool — a rarity in downtown Salt Lake City apartment buildings — Alta Gateway Station boasts an expansive fitness area, bike-ski repair shop, pet care room and climate-controlled wine cellar with personal lockers for rent. The underground parking garage is equipped with electric-vehicle charging stations.

“We’re at the top of the market in terms of finishes,” said Steck.

Reset a tax clock?

Wood Partners and The Gateway mall’s current owner Vestar are now in discussions with the city to extend urban-renewal tax credits in that western corner of downtown, known as the Depot District.

The tax rebates date back to before the 2002 Winter Olympics and Utah-based The Boyer Company’s city-subsidized development of Gateway, its Olympic Legacy Plaza and supporting utilities.

The lucrative breaks on new property taxes generated in the city-drawn district — known as increments — are set to expire in 2020, though to be tax-eligible, projects had to have broken ground by 2015.

Vestar CEO David Larcher, based in Phoenix, confirmed talks with the city’s Redevelopment Agency, or RDA, to extend the tax-increment financing.

Larcher said Vestar’s $30 million-plus overhaul of Gateway — including a new hotel and rebranding of the open-air shopping center into an art-heavy entertainment hub — is still only partly complete.

Clay Iman, development director with Wood Partners, said his company was seeking tax help because Alta Gateway’s second phase required the costly burial of immense electrical pylons to the north, owned by Rocky Mountain Power. The utility has so far turned down requests to share those undergrounding costs, Iman said.

City Councilman Derek Kitchen, who is also RDA board chairman, and a spokesman for Salt Lake City Mayor Jackie Biskupski, who serves as RDA executive director, said they were receptive to exploring the district extension, though it was early in the discussion.