by Staci Davidson
Highridge Costa uses its extensive expertise in affordable housing to deliver quality communities that support residents.
The National Association of Home Builders (NAHB) has recognized Highridge Costa with the Best Affordable Rental Community for people aged 50 and older (50+), the Best 50+ Independent Living Community and the Best 50+ Mixed Use Community for its Perris Station Senior Apartments in Perris, Calif. The Perris project also was a finalist in the multifamily category for NAHB’s Best in Green Awards and received a Pillars of the Industry award in the NAHB’s multifamily category. Additionally, Perris Senior Apartments was named Project of the Year by the California Council on Aging’s SAGE Awards.
This is just one project from Highridge Costa and just a small example of the awards the company has won. The recognition for the company is important because it shows its ongoing dedication to quality and the care it puts into its work. But there is more to the company than awards. And when Founder, CEO and President Michael Costa was asked to sit down and come up with the number of lives Highridge Costa has touched through its work, he found this to be a daunting task, but also one that filled him with joy.
“We are in the business of changing lives,” Costa stresses. “In terms of the number of lives we’ve touched, that number will be pretty big, but it is definitely something to celebrate.”
Based in Gardena, Calif., Highridge Costa specializes in the development, financing, construction and asset management of affordable and mixed-income housing for families and seniors. The company uses low-income housing tax credits, as well as many other types of public and private financing, to build its communities, which are known for their quality. Throughout its history, Highridge Costa has been involved in the development and financing of nearly 29,000 units of affordable multifamily housing.
“This is a very unique industry and it’s something we absolutely love,” Costa says. “What keeps us charged is we have grand openings and get to talk to the residents about their experiences. They may have been in a deplorable situation previously and they tell you their story, but now they have a home here. We build to market-rate standards, and many of the residents would never imagine they would ever get to live in such a beautiful community. To hear such genuine ‘thank yous’ from them motivates you more than anything.”
Costa’s involvement in the affordable housing market dates back to 1979 when he started working for Calmark right out of college. . In 1994, Costa founded what is known today as the Highridge Costa. The company started construction on its first development – Valley Village Senior Apartments in Los Angeles – its first affordable housing project. As the only employee of the company at the time, Costa oversaw the project, and by 1996 got into the syndication of tax credits, where it sold tax credits to banks to raise equity capital to build affordable housing. Later in 1996, KBMH was sold to Denver-based Simpson Housing Services (SHS), which was focused on market-rate apartment developments. Costa held partial ownership of SHS until 2007, when he got a partner and they purchased the company, becoming McFarlane Costa. With the economic downturn of 2008, however, McFarlane Costa fell through, so Costa recapitalized.
The company went through an extensive recapitalization and became Highridge Costa in 2010 with a continued focus on affordable housing in the western United States, even though the business had been in more geographic areas prior to the downturn. The company focused on only developing affordable housing under the 1986 tax credit program. Highridge Costa is not only the builder, but also finds the sites, obtains the approvals, works with the neighbors, manages the financing, packages all of the information and submits it to the state to receive tax credits for the development and manages the credits’ syndication. This full service offering is part of what distinguishes Highridge Costa in the market.
“What really started to separate us in the industry is rather than hire a syndicator to sell our tax credits, having a background in syndication, we began to sell all of our credits to financial institutions ourselves,” Costa explains. “There was no middle man and we were really one of the first to sell direct. As a result, we became responsible for reporting to investors, which created the need to establish an asset management group within the company. Additionally, we are a licensed general contractor in California.”
Costa believes his company was one of the first, if not the first, to maintain all of this expertise in-house in the affordable housing market, which helped it focus on quality. “For the first 10 to 15 years in the industry, most firms were either developers or syndicators,” he says. “No one was both, but we were within our own company. It not only allowed us to be more efficient, but we also didn’t have to pay third-party feed for building financing and the sales of the tax credits, allowing us to invest more into our communities.”
Highridge Costa’s communities are a key aspect in how the firm is distinguished from other affordable housing developers. The company stresses that its operation is dedicated to the long-term aspects of the business, so it strives to always create value through the development and ownership of its communities. The company uses higher-quality materials and finishes than most other affordable-housing developers, as well as talented architects. It’s important to Highridge Costa that the developments fit seamlessly into existing neighborhoods. In addition, each development has a non-profit partner that provides services to residents, such as education, computer classes and afterschool programs for children.
In late March, Highridge Costa celebrated the grand opening of El Sereno Senior Living in Cibolo, Texas. This is a $21 million, 136-unit affordable apartment community for seniors aged 55 and older. The apartments offer nine-foot ceilings, full-size energy efficient appliances, covered balconies or patios, and washer/dryer connections. The community amenities include a clubhouse with kitchen, wi-fi, on-site leasing office with property manager, game room, fitness room, yoga room and laundry room. Residents also have access to a walking path, secured-gate access, a pavilion with swimming pool and picnic tables, and grills. The company notes 119 units are for seniors earning 30 to 60 percent of the area median income, 17 units will have market-rate rents, and 10 units are for persons with disabilities.
“We are really big on using finishes that will last in our developments,” Costa explains. “Roofing, siding, windows and trim – when they are of higher quality, they usually have a nicer design, too. As a result, we end up with a nice-looking community. When we work with the architects, they want to win awards, and when we ask them to design an affordable housing community they might think the design needs to be simple and not exciting. But we show them it’s an opportunity to help us develop something that is aesthetically pleasing while not having to overspend.
Last fall, Highridge Costa broke ground on the $130 million Kulana Hale mixed-use and senior affordable apartment community in Kapolei, Hawaii. Being built in three phases, the project involves two 13-story apartment towers and a single-story commercial rental space. The tower for seniors will have 154 affordable units and amenities will include a community meeting room, picnic area and community workspace with high-speed internet access. The second tower will have 143 affordable apartment units for families with the same amenities.
“This is just outside Honolulu and will take up a full city block,” Costa says. “It has retail on the first floor, around the entire block with two towers coming out of the center of the block. It is one of the largest projects we’ve built, and the state has really opened up its arms to a relationship with us. All of the affordable housing communities we have developed are the result of public-private partnerships. We are already working a second and third project in Hawaii – one in downtown Honolulu and a senior community on the island of Oahu.”
As of the end of 2018, the company has developed more than 29,000 affordable housing units that brought Costa’s involvement to over 40,000 units of hos 40-year career. He has ben recognized by being inducted Affordable Housing Finance’s Hall of Fame as well as into the California Housing Consortium’s Hall of Fame, which recognizes leaders in the state’s affordable housing industry. Additionally, Highridge Costa is no longer only creating new developments.
After the company has owned an affordable housing community in California for 15 years, the company is eligible to rehabilitate it and obtain new tax credits. Costa notes the company has used the new credits to rehab 25 properties so far. “We continue to have fun, so we are looking forward to creating more affordable housing, which is in great demand in today’s market.”
Costa said, “We are under construction right now on our first community for homeless veterans and we have two more homeless projects following. “It’s a more intense affordable housing undertaking, while using tax credits and other programs to deliver them. We will bring in programs to counsel, educate and continue to help the homeless veterans to move up, so we are very excited about that.”
He notes that Highridge Costa’s team includes a number of people who have been with him for more than 20 years, and feels “very fortunate” to have people who are loyal and love what they do. Costa also has mentored a number of people that have gone out to start their own development companies, and that is fulfilling to him, as well.
“Today there are more mixed-use communities,” he says. “We’re seeing more inclusionary zoning rise up where market-rate developers are being asked to include 20 to 30 percent affordable units in their developments. Often, we will partner with them to help provide our expertise for those developments.”
Regarding development, Highridge Costa is currently working on nine sites in California, four or five in Texas, three in Hawaii and two in Colorado. Costa explains the company also has 100 additional communities within it portfolio in California that are or soon will be eligible for rehabilitation, so the company will continue to stay busy for the long term.
“We’ve established a culture of people who love what they do, and the recognition and awards are important, but it’s really about the residents,” he says. “We share the stories of the residents with everyone at the company so they understand what they are a part of. To see our incredible longevity and the love for what our company is doing, it is great. Recently, one of our non-profit partners sent us three stories from three different residents; all were all stories about struggles, and through living in our communities each said it has saved their lives. We’re proud of that, and that is what creates an incredible culture.”