Financing will likely constrain Santa Cruz’s Clocktower Center to 8 stories instead of 16

Nothing in Santa Cruz County this year has stirred up quite the frenzy as the proposal for a 16-story mixed-use residential tower behind Santa Cruz’s town clock. Now, it sounds like the community might be moving past it. 

According to Sibley Simon, a partner at Workbench, the local development/architectural firm behind the proposal, a high-rise at the northern edge of downtown Santa Cruz is financially infeasible. Reached by phone Thursday, Simon clarified comments he made the evening before during Lookout’s panel on housing policy.

The community, he said, should expect to see a seven-to-eight-story mixed-use project behind the town clock, not 16 stories. Simon said the major hurdle is not political or permitting, but financing. Building above eight stories becomes exorbitantly more expensive, he said, as construction materials evolve from wood framing to requiring concrete and steel. A 16-story residential tower also represents a groundbreaking type of development in Santa Cruz County, which Simon said presents too much risk for lenders and financiers who want guaranteed returns on the projects they fund. 

“The next few projects in Santa Cruz County, for now, are going to be wood-framed, which means not more than seven to eight stories,” Simon said. “At some point, somebody will figure it out. Costs will go down.” But he said for the Clocktower Center, the community could expect something in the eight-story range. 

Although Simon is a partner at Workbench, he is not a lead on the project. Workbench’s founding partners, Tim Gordin and Jamileh Cannon, were unavailable for further comment. 

Lookout first reported on the Clocktower Center proposal in April. Workbench originally referred to the project as an 18-story mixed-use high-rise, but later amended the story count to 16. Early renderings of the tower polarized the community, and quickly altered perceptions of what is possible under a dizzying number of recent changes to state law aimed at encouraging more affordable housing. The proposal to build a 192-foot tower in a city zoning district that permits heights only up to 50 feet soon became a symbol for what many see as a deterioration of local control around housing development. During two early community meetings, the messaging from the developer was that the project was legal under the state’s density bonus law, which allows developers to ignore certain local rules, such as height restrictions, as long as the development includes a certain level of affordable units. 

However, Simon said financial conservatism, not political pressure, will likely keep the tower from reaching its 16-story ambition.

“There is no one who has previously invested in or lent to a tower in Santa Cruz County, and that always creates a hurdle to get someone to do it first,” Simon said. “It’s also that financiers who fund projects like that aren’t doing similar business in Santa Cruz and are not familiar with Santa Cruz. It’s not so much about the tower itself. It’s that every time you’re doing something new, it’s another checkbox under the risks. It’s not repeating something that they’ve made money on five times before, which is what they want to see.” 

A proposal that includes relatively few parking spots — Clocktower Center proposed 78 for a tower with 260 units — also makes lenders and financiers nervous, Simon said. 

Still in its infancy, the project is in only the pre-application phase. Simon said Workbench has until the end of September to submit a revised, formal application with the city. He did not say when he expects the firm to formally submit a plan with the city.

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