The future of an approved, five-story apartment complex next to Marianne’s Ice Cream on Ocean Street is uncertain. (BDE Architecture)
SANTA CRUZ >> The developer of a planned 389-unit apartment complex on Ocean Street has walked away from the project, throwing the site’s future into uncertainty.
Construction was slated to begin next year on a five-story project at 908 Ocean St. next to Marianne’s Ice Cream. It had three buildings and 54 below-market-rate homes, and it would have spanned from Hubbard Street to where Togo’s sandwiches stood on Ocean Street. The Santa Cruz Planning Commission approved it in February.
Developer High Street Residential, a subsidiary of global real estate firm Trammell Crow Co., recently backed out of the project. Financing and costs appear to have been factors.
Sridhar Equities, a Los Gatos-based private equity real estate firm, owns the 4.15-acre site.
“At this point, we’re not in contract, and we are looking at options,” said Matt Sridhar, CEO of Sridhar Equities. The firm could sell the land, find a new developer, develop the parcel itself, hold on to the land until the economy improves or find another solution.
A non-disclosure agreement prevented Sridhar from addressing the specifics of the breakup with Trammell Crow. In general, high interest rates, high predevelopment costs, long city approval times and rising construction costs have made it hard to get projects off the ground, Sridhar said.
“This is a difficult climate,” Sridhar said. “There isn’t enough margin in a lot of these deals to stomach the doubling of interest rates and a 15% to 20% increase in material costs.”
He blamed tariffs for exacerbating the situation. “Those interest rates were forecast to be lower but have since stalled because of tariffs,” Sridhar said. “Another problem is that tariffs are directly causing materials and goods to be more expensive.”
Sridhar called it “frustrating” to lose his developer, but said it’s “par for the course” in real estate.
Sridhar said he has acquired 18 separate parcels on Ocean Street, Hubbard Street and May Avenue in recent years.
“Such an assemblage of real estate is very hard to come by,” Sridhar said. He said he wanted to “build something that brings value to the community and much-needed housing.” He added, “We’re looking forward to making something happen there.”
Unlike some other housing proposals in Santa Cruz County, many neighbors praised the developer for incorporating their input.
Lots on Ocean Street and May Avenue are proposed to be combined for new housing and commercial space. (Brian Phan — Santa Cruz Local file)
A rendering shows approved apartments at 908 Ocean St. (BDE Architecture)
First proposed in 2018, the 908 Ocean St. project has been modified several times. The latest version called for a five-story building on Ocean Street and two three-story buildings on May Avenue. The 389 total units would have been a mix of studios, one-, two-, three- and four-bedroom apartments, with 36 homes reserved for “very low income” tenants and another 18 homes reserved for “low income” tenants.
A public walkway and barbeque area was approved, along with nearly 100 new trees and 19 new light poles.
Some neighbors have called the block blighted with an empty lot, boarded up buildings and illegal drug use. Some said they hoped the new development would bring more foot traffic and activity to the area and quell illicit activities.
“We really, really wanted that to come here,” said Racheal Murphy, owner of Callahan’s bar at 507 Water St. “This neighborhood needed that so badly.” She said the plans for the new buildings were “stunning and fit right in,” and that this latest setback made her want to cry.
Murphy grew up in the neighborhood and said it used to be safe. “Now, you can’t go out if it’s not light out without being accosted or having to see something you don’t need to be seeing,” she said.
Ryan Bane, a Santa Cruz senior planner, said Wednesday that the city hadn’t been told yet that the developer was out.
“It would be disappointing if they weren’t able to make it work,” Bane said. “We as a city thought it was a great project developing an underutilized site.”
Bane said the loss of 389 potential units certainly wouldn’t help as the city attempts to meet its state-mandated housing targets. But he isn’t discounting those units just yet, pointing out that the site is still available for development.
As Sridhar explores his options, he has posted security on the property. “We’re doing the best we can to keep the place clean and maintained,” he said.
Trammell Crow representatives did not immediately return a request for comment.
Building A was approved at five stories on Ocean Street, and buildings B and C were three stories on May Avenue. A public walkway was planned through the center. (BDE Architecture)
Lots on Ocean Street, including a former Togo’s sandwich shop, were slated for redevelopment. (Nik Altenberg — Santa Cruz Local file)
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Jesse Greenspan is a freelance journalist who writes about history, science and the environment. His work has appeared in The New York Times, Scientific American, Audubon and other publications.
