A long-range planning blueprint approved by Santa Rosa in 2020 set a lofty goal of adding 7,000 new homes in the 720-acre downtown within 20 years.
It was an ambitious move aimed at transforming what had historically been a business and financial hub into a thriving community with residents who could support restaurants, shops and other attractions.
Longtime local stakeholders as well as out-of-town property owners bought into the idea, bringing forward plans for more than a dozen major projects that would’ve added just under 3,000 homes.
“We just feel it’s important to build housing downtown — dense, transit-oriented housing,” Pauline Block, with Cornerstone Properties, one of the major housing proponents, told The Press Democrat in 2020. “If we want to grow Santa Rosa and we want to grow in a way that’s sustainable, this is what we need.”
Under a previous 20-year plan for downtown, the city had made little headway on its housing goals, getting to just 11% of its 3,400-unit mark.
This time, it seemed like the city was well on its way toward realizing the fuller vision, and much sooner than anticipated.
But despite some wins, most of the biggest projects exist only on paper.
Initial progress slowed in recent years, as natural disasters, the pandemic and a volatile market continue to upend the construction industry.
The latest setback came earlier this month, when a downtown parking lot — the centerpiece parcel of Cornerstone’s biggest downtown housing proposal — was yanked back into city possession for lack of demonstrable progress.
With the Petaluma real estate investment firm apparently out of the immediate lineup, the city is facing questions about how it will move forward with its downtown plans and who has the capacity to get the job done.
There’s a short list of local developers with experience in urban development, and having the wherewithal to move a project forward, particularly in a tough economic climate, could require outside groups with more resources playing a greater role in development.
City leaders and development officials insist the city is on the right track.
“I do believe that there is a strong desire by a lot of organizations to develop in our community,” said Council member Jeff Okrepkie, adding that he didn’t believe the B Street lot buyback raised “overarching concerns about the development possibilities downtown.”
Okrepkie and others pointed to the recent opening of an eight-story apartment complex on Mendocino Avenue as well as interest from developers in other downtown properties as a strong signal that the city is hitting its stride.
Cornerstone projects in limbo
Plans for Cornerstone’s expanding downtown real estate footprint first came into clearer view years ago as Santa Rosa officials were putting greater focus on urban housing.
The company, founded in 1985 and run largely as a holding and property management firm, in summer 2020 submitted plans for two projects, an eight-story apartment on Ross Street — one of the parking lots acquired along with The Press Democrat headquarters in a 2014 acquisition — and the first phase of a project on a former rail yard on West Sixth Street on the west side of the downtown SMART station.
Together, the projects were expected to add more than 200 units, and future phases at the rail yard were anticipated to add another 400 to 500 apartments.
It was the company’s first foray into development and fit right in line with the city’s downtown plan. As Cornerstone’s profile grew, city and downtown stakeholders increasingly viewed the firm as key to leading the next wave of downtown development.
But that foundation was upended in an extraordinary move by the council on July 8 after it found Cornerstone had not shown any significant progress on its downtown plans.
The council approved repurchasing the parking lot it had sold in 2021 to Cornerstone, at 410 B St., for the same price, $1.34 million. The council found the company violated the sale agreement, which had required them to move forward with plans for the Ross Street, rail yard and B Street properties, steps they failed to achieve, according to the city, despite several extensions.
The 5-1 decision signaled a loss of confidence in the company’s ability to get a project done, especially as a lawsuit involving two of its top officials raise mounting concerns about the company’s finances and operations.
The move has thrown into limbo a project unlike anything Santa Rosa and the North Bay has seen: more than 850 units in two, 24-story skyscrapers that Cornerstone had slated for the B Street lot and adjacent properties.
Some of the city’s biggest housing advocates and business allies had embraced that proposal, calling it critical to achieving the city’s downtown vision.
“Although the council voted to repurchase the property at 410 B Street … this is the project on the table and we remain supportive as it progresses,” the nonprofit group Generation Housing wrote in an email blast to council members, describing the project as “a path to our vision for a vibrant, walkable, and inclusive downtown.”
Cornerstone officials say they intend to continue with their plans.
But legal filings show the company’s assets, including several of the downtown properties, have been entangled in a lawsuit involving the company’s main principals that’s scheduled for trial next year in Marin County Superior Court. Company officials have acknowledged the litigation has temporarily impacted their work.
A contracted attorney assisting Santa Rosa with negotiations with Cornerstone said the lawsuit, even if resolved, would make it difficult for Cornerstone to access construction financing.
Financial challenges, small developer pool
It’s unclear what kind of long-term impact Cornerstone’s sidelined status will have on the city’s downtown plans.
City planners canceled two public hearings this past week where community members could provide feedback on the company’s concept for the 24-story towers on the B Street lot.
The neighborhood meeting, which was slated for July 14, is required to advance the development plans.
The ongoing litigation, brought by Cornerstone principal Steven Kaufman against the company’s manager and his longtime friend and business partner Alon Adani, also has raised concerns that the company’s other prime properties downtown will remain vacant for the foreseeable future.
Okrepkie said downtown development is unlikely to take a big hit because of the ordeal.
“It’s one thing if these projects were entitled and financed and essentially shovel ready and something happened and then the project was delayed,” he said. “But at this point, none of that was the case. There had been no concrete development undertaken.”
Cornerstone’s story, in some ways, isn’t unique.
About 600 affordable and market-rate apartments have been finalized in the city center in the last few years.
That includes the project at 888 Fourth St., a 108-unit apartment completed in late 2023, and the first two phases of the Pullman Apartments on Wilson Street, which have added 114 units.
But of the nearly 20 major proposals brought forward in the last decade, most never got off the ground.
Those include a proposal for a seven-story apartment at 1 Santa Rosa Ave. that was set to transform a prominent corner of downtown across from Old Courthouse Square and a smaller mixed-use project with 24 apartments on B Street.
Other projects have been in the works even longer. Take the planned redevelopment of the historic DeTurk winery complex in the West End neighborhood first proposed in 2007.
“I think a lot of time, not to belittle anybody that wants to try to develop housing because it’s so important, but I think sometimes there’s too much optimism and not enough reality about what it really takes to get something done,” said Loren Brueggemann, principal of Phoenix Development Co., the firm behind the Pullman Apartments and Dutton Flats on West Third Street.
The high cost of construction has long been one of the biggest challenges to bringing more urban housing to Santa Rosa.
The city has sought to help lower some of the cost by cutting development fees and reducing the time it takes for permits to be reviewed from around one to two years to six months, which can help provide more certainty to developers.
But costs continue to be an issue, especially with high interest rates and now tariffs stirring further fears in the industry that it will drive up the price of materials even more.
“Those of us that are in it are watching with great trepidation,” Hugh Futrell, a longtime downtown property owner and developer, said of the impact of tariffs on construction.
Futrell is behind the redevelopment of Hotel E in the former Empire Building, renovations at the hulking AT&T building, construction of the affordable Humboldt Apartments and next-door Art House hotel and extended-stay apartments and the apartments at 888 Fourth St.
Futrell said the changing market has made the job even tougher and developers must bring projects forward that can pencil out.
“It doesn’t do any good to get projects designed and entitled that aren’t going to be built,” he said.
Brueggemann said some of those hoping to take on projects downtown don’t have the experience or an understanding of what the local market can support.
Many developers in the region specialize in single-family homes or low-density housing and the pool of developers that build the type of medium- to high-density housing needed to meet the city’s downtown housing goals is small.
Brueggemann, who hopes to start construction on the final phase of the Pullman projects and a separate infill development that would convert two bank buildings into 72 apartments on B Street, said inexperience can make it tough to access construction financing if lenders think it’s a risky deal.
“Especially now, if you don’t have a long track record, it’s really hard to get a lender to work with you,” he said. “The first question is what’s your experience. And if it’s your first project out of the gate you have an uphill battle.”
City headed in right direction, officials say
The kind of transformation envisioned downtown takes time, city leaders and downtown stakeholders said.
“We had a pretty lofty goal of 7,000 units in the Downtown Station Area and I think anytime you look at … (making) a change to the overall fabric of the downtown with that residential presence that hasn’t historically been there, I think there’s an understanding that it’s a long road,” said Planning and Economic Development Director Gabe Osburn.
The city has staked much of its future progress on a new round of momentum.
San Francisco-based Related California recently opened the Felix on Mendocino Avenue, an eight-story, 168-unit apartment complex with amenities like a coworking lounge, fitness center and a rooftop lounge found in projects in larger cities.
Plans for a seven-story apartment at 425 Humboldt St., next to the Felix, have been revived after stalling in the pandemic. The Los Altos team behind the project anticipate breaking ground by years end.
And the city is seeing increased interest in city-owned properties up for sale.
The success of the Felix and other recent projects could help gauge whether there’s demand for more housing downtown and it could make it easier for additional projects to move forward.
“In a perfect world, the transition will take less than 20 years, but it will depend on a lot of economic factors,” Osburn said. “We’ve had a major disaster change how development happens in the city, a pandemic that affected the market, and there’s been a lot of uncertainty.”
“As we start seeing the concept proved out, when it starts going, I think there will be a bit of a snowball effect … and you’ll see construction happen on multiple sites at the same time.”
As that plays out, the city also is looking at other amenities needed to not only support future residents but also enliven downtown.
Osburn said his team has been engaged with developers, shop owners and members of the Downtown Action Organization to get a better feel of what’s needed.
A grocery store has long been seen as a critical need.
More entertainment options — including a more robust nightlife scene — and more diverse dining and retail options also could spur more interest in downtown living and attract visitors.
Futrell said Old Courthouse Square is increasingly booked with farmers markets, summer concerts, movie nights and other family-friendly activities, and new restaurants, breweries and bars are opening across downtown.
Sustaining that level of events is important, he said.
New employers that can attract both daytime workers and residents who want to live in walking distance to work also is key, he said.
But Futrell and Osburn also pointed to smaller projects that can enhance the physical space like streetscaping improvements such as parklets or planters, renovating pedestrian walkways like Comstock Mall off Santa Rosa Avenue or improving connections between the two squares.
A recently approved downtown financing district could help pay for such projects.
You can reach Staff Writer Paulina Pineda at 707-521-5268 or paulina.pineda@pressdemocrat.com. On X (Twitter) @paulinapineda22.