Looking for a company that can handle a tough job? The John Stewart Co. never turns down a challenge. In August 2005, the affordable housing firm signed on to redevelop a dilapidated San Francisco public housing project despite a major roadblock: a missing check from the federal government in the amount of approximately $30 million.
The San Francisco Housing Authority had tried unsuccessfully to secure HOPE VI funding for Hunters View three years in a row. The John Stewart Co. continued to believe that the project could still happen, even without millions of dollars in federal funding. The answer: HOPE, specifically HOPE San Francisco. The company is working with the housing authority and its development partners to replace the 267 public housing units through the new city initiative, which aims to revitalize distressed, low-density public housing in the absence of HOPE VI dollars through mixed-income development. The program relies on grants and funding from the private sector to fill in a portion of the financial gaps.
“I know how difficult it is to finance affordable housing of any kind,” says G. Allan Kingston, president and CEO of Culver City, Calif.-based Century Housing, one of California's largest affordable housing lenders. “To their credit, The John Stewart Co. is going out and saying, ‘We are not going to wait for some government program. We are going to do something that helps make the difference.'”
The John Stewart Co. (called JSCo for short) is the first to admit that Hunters View is a risky undertaking, but that only fuels the firm's interest in the project. “This is a very interesting, convoluted, brain-damaged deal in an unsafe neighborhood, which is what we like,” says company founder and chairman John Stewart. “These types of projects are just perfect for us.”
The company has garnered quite a reputation throughout the Golden State for its ability to manage and develop projects that others wouldn't dare touch, thanks to its proactive, no-nonsense approach. “They are able to roll with very difficult situations and very difficult property conditions,” says Carol Galante, president of BRIDGE Housing Corp., a San Francisco-based nonprofit developer. “I don't think there is anybody better to take over a HUD distressed property. There may be companies that are parallel in everyday development, but when you are really dealing with this messy stuff, they have a technical understanding as well as the fortitude to stick with these developments.”
PERFECT MATRIX The firm has certainly seen its fair share of brain-damaged projects, as Stewart likes to say, since the company was launched in 1978 with just three employees. “We are keen here on doing interesting one-off deals that most people won't do,” says Stewart, who founded the firm nearly three decades ago and is known throughout the multifamily industry for his commitment to affordable housing. “Although there is a higher level of anxiety and frustration, there's a lot of satisfaction to it, and the ‘ennui' factor is mitigated.”
Today, the 1,200-person company is California's largest manager of affordable housing, with two-thirds of its 28,000-unit portfolio consisting of apartments that lease for below–market–rate rents. JSCo has grown dramatically in the last several years under the leadership of Jack Gardner, who has increased the firm's management portfolio by about two-thirds since he took over Stewart's role as president in 2001 and CEO a year later. (For more information on the transition, see “Smooth Transitions” on page 31.)
Gardner's extensive resume includes leadership roles at both for-profits and nonprofits throughout California, including the Low Income Investment Fund and the Hollywood Community Housing Corp., and even a brief stint as a singing waiter (Gardner's been known to break into song and dance at a moment's notice). “I chose Jack because he has a renaissance background and disposition,” says Stewart. “Jack has both the development and the management experience, which I think is very important.”
Gardner and Stewart do complement each other nicely, says Keeley Kirkendall, executive vice president of ARCS Commercial Mortgage Co., who worked with both executives when JSCo was briefly owned by Southern California Edison from 1997 to 2001. “John is the big-picture dreamer, and Jack is smart enough to figure out what John is dreaming about and figure out how to make it work or talk John out of it.”
The two executives also share many traits, including a good sense of humor and, of course, a passion for the affordable cause. And Gardner welcomes new challenges as much as his predecessor—if not more. Every year, he and a friend climb a new mountain in the Pacific Northwest; they've already reached the peaks of Mt. Shasta, Mt. Hood, and Mount St. Helens. Gardner compares this annual pilgrimage to his work at JSCo. “The commitment and the mental toughness that it takes to keep putting one foot above the other to get to the top of the mountain is similar to how I see our business,” says Gardner. “It's all about the tools, the technique, and the teamwork.”