FINANCE

MIXED-INCOME/MIXED-USE

A Green Mixed-Use Community

BY JERRY ASCIERTO

AFFORDABLE HOUSING FINANCE • April 2008

Melaver, Inc., will soon break ground on Sustainable Fellwood, a 320-unit mixed-income, mixed-use green development in Savannah, Ga.

The 27-acre development will replace the state's first public housing site, Fellwood Homes, built in 1940.

Though it's the first large-scale residential development that the Savannahbased Melaver has undertaken, the company's track record of building green developments, its status as a local 65- year-old family-owned business, and its development partners convinced the Housing Authority of Savannah to give it the nod.

Melaver produced the city's first Leadership in Energy and Environmental Design (LEED)-certified structure, the preservation of a historic office building called The Whitaker Building, in August 2003. The company also developed the nation's first LEED-certified retail center in Savannah. Dubbed Abercorn Common, the shopping center included the first LEED-certified McDonald's restaurant, completed in November 2005.

"We always like to say we were into green before it was cool," says Denis Blackburne, Melaver's chief financial officer.

While its green credentials were strong, Melaver had little affordable housing expertise. So it partnered with Georgiabased nonprofit affordable housing developers Progressive Redevelopment, Inc., and Parallel Housing, Inc., on the project. Both companies had experience working with the state and local housing authorities. Melaver also partnered with Vanguard Distributors, Inc., a local minority-owned business with deep roots in the Fellwood neighborhood.

Sustainable Fellwood is due to break ground in early summer. The first phase will feature 110 rental units, and the second phase will also total 110 units, as well as 100 additional rental units of mixedincome seniors housing. The final phase will see the development of 44,000 square feet of retail and office space. The project is slated for completion in 2011.

The project will take part in the LEED Neighborhood Development pilot program, a melding of green building standards with a focus on making whole neighborhoods sustainable. The inclusion of commercial space was a natural outgrowth of LEED's guiding principles of building walkable communities, Blackburne said. Melaver is in talks with a community health clinic and also hopes to locate a local library branch in the commercial space.

The development will employ several green features such as paints, sealants, and adhesives with low levels of volatile organic compounds; energy recovery ventilator systems, which transfer heat and moisture between incoming and outgoing air; and efficient water features, such as dual flush toilets and low-flow showerheads and faucets, which can reduce water consumption by 30 percent. Additionally, several park spaces and an organic community garden will be among the project's amenities.

Melaver solicited much community input on the development's layout, meeting with the local neighborhood association several times early in the planning stages. "Some really good advice came out of that," said Blackburne. "We originally had the seniors units off to the side, in a nice quiet place, but the community said, 'Bring the seniors closer to the retail and the bus stop.'"

Of the development's first 220 rental units, 40 percent will be for public housing, another 40 percent will target those earning up to 60 percent of the area median income, and the final 20 percent will be rented at market rates. Sustainable Fellwood will also feature 10 single-family for-sale units, some of which will sell for as low as $90,000 through a city assistance program called DreamMaker. The income levels of the seniors housing component had yet to be determined at press time.

Putting the deal together

The first phase of Sustainable Fellwood received $8 million in federal low-income housing tax credits (LIHTCs), and another $8 million in state tax credits. The federal credits fetched about 90 cents to 95 cents each, and the state credits were sold for about 25 cents each, adding up to about $9.9 million in total LIHTC equity for the project. SunTrust Community Development Corp. provided the LIHTC equity, as well as nearly $2 million in debt.

For its part, SunTrust Community Development Corp. said the retail portion of Sustainable Fellwood would be a good fit for New Markets Tax Credits (NMTCs). SunTrust received a $100 million allocation of NMTCs in October. "Fellwood is a deal where we can bring in retail to complement the housing, and make the deal pencil out with heavy subsidies from the NMTCs," said Paul Woodworth, SunTrust's senior vice president.

Additionally, more than $3 million in financing will come from the Department of Housing and Urban Development in the form of replacement funds, since Sustainable Fellwood replaces public housing on land owned by the city.

The first and second phases will cost about $15 million each, and the total cost of development, including the commercial space and single-family homes, is nearly $50 million. Melaver will apply for the same amount of LIHTCs for the second phase, as well as additional LIHTCs for the seniors housing component. Each member of the development team will defer developer fees to help the project pencil out.

Melaver also received assistance from the city, which has pledged $4.5 million for infrastructure development. Additionally, the city designated the area as an Enterprise Zone, which offers property tax abatements. Home Depot has also pledged a six-figure grant, though Melaver said it was too early in the process to name the exact amount.