The preservation of a large scattered-site development in Camden, N.J., has become the first moderate-rehabilitation deal to be approved under the federal Rental Assistance Demonstration (RAD) program's first component.
Broadway Townhomes is made up of 159 buildings with 175 units. The properties, which feature 76 two-bedroom and 99 three-bedroom apartments, are spread throughout an approximately 12-by-14 block region.
Roizman Development has owned the project for more than two decades, completing its first renovation around 1991. Company leaders recognized it was time to refinance and perform a gut rehab of the development.
The project’s Sec. 8 contract was being renewed on an annual basis. RAD was critical to the deal because it allowed the property to receive a 20-year project-based Sec. 8 contract. Having a long-term contract is critical because it makes lenders and other financing partners much more comfortable with a deal.
“The RAD program is extremely important,” says Israel Roizman, president and CEO of Roizman Development. “To finance the mod-rehab program, you need a long-term Sec. 8 contract. You cannot finance it with one-year-at-a-time extensions.”
That’s the key conceit of why RAD is important, says Benjamin Metcalf, HUD deputy assistant secretary for multifamily housing programs.
“It shifts people off the drip of a one-year contract,” he says. “It gives them a certainty a long-term, 20-year contract, and they can then begin to finance again and receive equity investment again. What RAD provides at the end of the day is the certainty of a long-term contract for on-going rental assistance.”
RAD is central to HUD’s rental housing preservation strategy. The program has two components. The first allows public housing and Mod-Rehab properties to convert, under a competition limited to 60,000 units, to long-term Sec. 8 rental assistance contracts. The second allows HUD Rent Supplement, Rental Assistance Payment, and Mod-Rehab properties to convert tenant-based vouchers to project-based assistance.
Under the second component, Catholic Charities Progress for Peoples Development Corp. converted a 205-unit Mod-Rehab contract at its three-building Caring Communities project in Brooklyn to RAD last fall, becoming one of the program's initial Mod-Rehab transactions. The RAD contract allowed the project to use tax-exempt bonds and tax credits to preserve the apartments for formerly homeless individuals. In addition, 28 new apartments were added.
Broadway Townhomes falls under the first component and is the first Mod-Rehab deal in that group to close, according to HUD.
“It was a true public-private partnership,” says Metcalf, explaining that the deal received support from city, state, and federal sources.
The project is unusual because of its scattered sites, but the properties are managed and operate as a single asset.
Roizman credits HUD officials for their efforts, including making sure different rules from different financing programs were compatible and getting the deal to close.
Broadway Townhomes is about a $53 million project financed largely with tax-exempt bonds and 4 percent low-income housing tax credits from the New Jersey Housing and Mortgage Finance Agency. The bonds provided about $17 million. The housing tax credits, which were syndicated by R4 Capital, generated roughly $20 million in equity.
Love Funding was the lender, closing a $17.5 million loan for Broadway Townhomes through HUD’s Federal Housing Administration 221(d)(4) program. The firm estimates that the renovations will be more than $100,000 per unit.
“It’s a good use of the RAD program,” says Leonard Lucas, senior director in Love Funding’s Boston office. “There’s been some rehab going on in Camden. Now, 156 townhome units are going to be done.”
The second component of RAD is scheduled to expire at the end of the year. The program’s future after this year is uncertain. HUD will need to secure authority in the fiscal 2015 spending bill to continue to do these types of deals. Senate Bill 2438, which was introduced by Sen. Patty Murray (D-Wash.) in June, seeks to increase the second component’s time through 2016.
The first component has seen stronger activity, with requests for roughly three times the 60,000-unit cap. S. 2438 seeks increasing the cap to 185,000 units. The House-passed spending bill did not include an increase. View a list of the Top 10 public housing authority applicants.
Connect with Donna Kimura, deputy editor of Affordable Housing Finance, on Twitter @DKimura_AHF.
Editor's Note: An earlier version of the story incorrectly reported that Broadway Townhomes was financed under the second component of RAD. AHF regrets the error.
