Affordable Housing Finance

GREEN SCENE

Making Room for Green

AFFORDABLE HOUSING FINANCE • February 2009

BY BENDIX ANDERSON

DEERFIELD BEACH, FLA.—While other developers are tightening their corporate belts, Carlisle Development Group found a surplus in the construction budget for its Tallman Pines redevelopment big enough to try green building, thanks to conservative budgeting and boom-time tax credit prices.

It got even greener when Carlisle found it still had an additional $150,000 left in the budget for a set of solar panels in December 2008 as construction finished.

Carlisle has wanted to go green for years, but there was never enough slack in its tight development budgets to justify what could be an expensive experiment—until very conservative underwriting carved out a chance to make Tallman Pines the first affordable housing development in Florida to seek Leadership in Energy and Environmental Design (LEED) silver certification from the U.S. Green Building Council, says Ken Naylor, senior developer for Carlisle.

Carlisle partnered with the Broward County Housing Authority to replace 112 decrepit public housing units on Tallman’s site with 200 new apartments affordable to low-income families and 42 for-sale single-family homes. The first apartments were finished in June 2008 and are saving 40 percent on their water bills and 10 percent on their electric bills compared with similar apartments, says Naylor.

The developer estimated in 2004 that it would cost $14.5 million to build the apartments. By the time Carlisle applied for low-income housing tax credits (LIHTCs) in early 2006, the condominium boom inflated costs for labor and materials, such as the concrete blocks required in hurricane country for even two- and three-story apartment buildings like those planned at Tallman. Carlisle conservatively estimated the development cost at $20.2 million.

Contractors bid the job under budget at $18.2 million. Tallman also had extra breathing room thanks to a commitment from Bank of America (BofA) to pay $1.07 per dollar for Tallman’s LIHTCs.

“The craziest thing we had to do was start adding green features when we already had a designed and permitted project,” says Naylor.

Workers had already poured the foundations for the apartments in early 2007. That ruled out switching to more efficient, but larger, heating and air-conditioning systems. However, even as planned, Tallman had a head start in the race to go green—it reuses a site with existing infrastructure and is located near two bus lines.

It only cost $800,000 to make Tallman energy-efficient and environmentally sensitive enough to seek LEED certification—and that includes $150,000 for solar panels. Some green practices proved so cost effective Carlisle now uses them at conventional developments: Water-saving fixtures pay for themselves almost immediately, and the developer saved money by buying recycled concrete for fill and disposing of construction waste through recyclers who squeeze value from scraps.

Tallman’s total cost came to $19 million, still more than $1 million under budget.

That meant that the developers could cut the size of Tallman’s planned package of loans. The apartments at Tallman Pines carry a $3.4 million permanent mortgage along with a $3.4 million tax-exempt mortgage, both from BofA. The development also raised $28 million in equity from the syndication of 4 percent and 9 percent LIHTCs by The Richman Group to BofA. Another $1 million in soft financing came from HOME funds.

With little debt and low utility costs, Tallman’s operating budget should be solid for years to come.