Bold Financing Fills Need

AFFORDABLE HOUSING FINANCE • August 2008

BY BENDIX ANDERSON

NORTH SMITHFIELD, R.I. - The 80 affordable seniors apartments at the Meadows might look old-fashioned, with burgundy and yellow siding and a weather vane on the peaked rook over the front door.

But don’t be fooled—this cutting-edge development also has an energy-efficient green design, an ambitious plan to provide services to its residents, and “the most complicated financing I’ve ever done,” according to Joe Garlick, executive director of NeighborWorks Blackstone River Valley (NBRV).

The Meadows is one of the first seniors developments in the nation to leverage lowincome housing tax credits (LIHTCs) with a capital grant from the Department of Housing and Urban Development’s (HUD) Sec. 202 program. Before Congress changed the law in 2000, construction paid for with Sec. 202 grant money could not count as eligible basis for LIHTCs.

NBRV applied to mix funding before HUD finalized the new rules, which took the agency several years. To keep ahead of rising construction costs, the developer started construction in December 2006, even though the closing documents for its financing, which had to meet the requirements of a private bank loan and the LIHTC and Sec. 202 programs, weren’t ready.

The developer took out a series of interim loans, including a $17.5 million construction loan from Citizens Bank. In January 2008, the developer replaced the Citizens Bank loan with $16 million in taxexempt bond financing that came with a reservation of 4 percent LIHTCs.

The apartments were finished in May, helping to fill a desperate need for affordable housing in this town, which has the longest public housing waiting list in the state.

The low-income seniors living at the Meadows will receive a broad range of services including nurse visits, meals, senior employment programs, and educational activities. The property includes 2,000 square feet of community space, including a café and wellness center.

This summer, after barely six months, the developer plans to replace the taxexempt loan with $20.2 million in permanent financing, including the $7.5 million Sec. 202 “capital advance” grant. The development will also receive $6.2 million from the sale of LIHTCs to the National Equity Fund, Inc.; another loan from Citizens Bank for $1.8 million through the Federal Home Loan Bank’s Affordable Housing Program; and $1.5 million in deferred developer fees.

The town of North Smithfield pitched in $525,000 in Community Development Block Grant funds to pay for some unexpected site work. A $500,000 grant from NeighborWorks America helped the Meadows meet federal Energy Star standards for conservation. The developer dug a geothermal system under the property that allows the units to be heated and cooled by electric heat pumps that are 30 percent more efficient than a gas furnace.

The Meadows also received $1.2 million in soft financing from the state’s Building Homes Rhode Island program; $575,000 in local HOME funds; and $400,000 in soft financing from the Rhode Island Housing Resources Commission.

“We have the tallest stack of closing documents I’ve ever seen,” said Garlick.

Corde