ArtHaus Dwight, a ground-up development project that is currently under construction in Berkeley, CA, is our first venture into student housing and an example of our expertise in site selection and entitlement. For this project, we assembled 3 adjacent parcels in an Opportunity Zone only 4 blocks from UC Berkeley campus. Through strategic land assembly and an expert understanding of California's housing laws, the ArtHaus Dwight project has become a prime example of our ability to create significant value while addressing a critical market need. The entitlement of the site resulted in a increased land value of over $9M, based on a third-party appraisal.
Ground-up development
ArtHaus Dwight
The Opportunity
We were presented with the opportunity to purchase two existing four plexes on 0.60 acres in close proximity to UC Berkeley for $4.35 million. We then worked with the adjacent property owners to purchase two additional fourplexes on individual properties for $1.9 million each. In development we chose to retain the two exterior fourplexes where there were long term tenants and demolish the two interior buildings.
Our Approach
Our strategy for this Student Housing Opportunity was similar to our Workforce Housing products, find a site that is close proximity to transportation and local services; assemble adjacent properties to increase project size; use the State Density Bonus to increase project size.
01
Identify the opportunity
Berkeley presents an ideal market for our investment strategy, targeting urban centers with a severe lack of housing. The student housing market in Berkeley is one of the most competitive in the country, UC Berkeley houses only a fraction of its student body, with a significant majority needing to find off-campus housing. This persistent demand, coupled with limited new construction over the past two decades, has led to some of the highest rents in the Bay Area. ArtHaus Dwight is uniquely positioned to address this need.
02
Select the best site
ArtHaus Dwight is strategically located just blocks from the University of California, Berkeley, a top-ranked university with a massive student population of over 45,000. ArtHaus Dwight is within walking distance to the campus, shopping, restaurants and other services. It is also within an Opportunity Zone, which enabled the project to qualify for our Ozone Fund III, LP.
03
Develop a Student Housing Strategy
Our student housing strategy is an extension of our successful workforce housing model, built on the core principles of providing thoughtfully designed private spaces, right-sized amenities, and convenient access to transportation and local services. We understand that whether a resident is a young professional or a university student, their need for a comfortable, private retreat is paramount. To ensure our project truly meets the needs of its future inhabitants, we conducted multiple focus groups with both students and parents. These sessions provided invaluable insights into their preferences. The result is a housing strategy that offers a superior and well-rounded living experience.
04
Collaborate with the Best
To deliver the best possible living experience for students, we've partnered with a team of top-tier professionals. Architect Toby Levy of Levy Design Partners brings a meticulous approach to the ArtHaus Dwight project, thoughtfully designing each unit and amenity spaces with the same care and attention to detail as our successful workforce housing units. The result is a project with right-sized, individual bedrooms and carefully curated amenities specifically tailored to student life. For construction, West Builders, a highly-regarded local builder with extensive experience in student housing and a proven track record of successful projects throughout Berkeley, have been with us since the design phase. Their local expertise ensures a smooth and efficient build, guaranteeing a quality living environment for future residents.
05
Use California State Laws
We successfully entitled ArtHaus Dwight for 66 student housing units, demonstrating our profound expertise in California's complex entitlement processes. Our strategic approach leveraged key state housing laws, including the Density Bonus Law to significantly increase the project's density beyond what local zoning might typically allow, and SB330 (the Housing Crisis Act of 2019), which streamlined the approval process and limiting the City's ability to change the project zoning or fees.
Project Results
The project was entitled in just 7 months. Post entitlement the project was appraised at 2.1x the value of the purchase price, a land appreciation value of $9.25 million. The project started construction in September 2024 after closing a $40.9 million loan with Citizens Bank. The project is expected to be complete in June 2025.
| IRR | EM | EM | |
|---|---|---|---|
| Land At Entitlement | 33.5% | 1.5x | Equity multiple on land acquisition based on appraised value of $17.4M |
| Project at Stabilization | 29.9% | 2.4x | Equity multiple on invested capital at completion, based on appraised value of $84.9M |
| Project at Disposition | 16.0% | 3.7x | Equity multiple on invested capital at 10-year disposition |
1.All return metrics shown are gross of fees.
2.Difference in total cost basis after land lift is driven by higher loan origination fees and interest payments due to increased loan amount.
Conclusion
Through strategic land assembly and an expert understanding of California's housing laws, the ArtHaus Dwight project has become a prime example of our ability to create significant value while addressing a critical market need. The rapid entitlement process and a land appreciation of over 2x our purchase price underscore the power of our approach, validating our ability to execute complex projects that deliver exceptional returns and provide much-needed housing in underserved markets.
