Affordable Housing Finance

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Readers' Choice Finalists

Preservation Finalists

AFFORDABLE HOUSING FINANCE • July/August 2009

Saved from the Boom

BROOKLYN, N.Y. To keep hundreds of apartments at Spring Creek Gardens affordable, developers had to fight off a string of speculators who saw an opportunity to raise the rents.

“We were able to snag it away from the market-rate buyers,” says Matthew Schwartz, principal with The Domain Cos.

Today, 492 of the 582 apartments at Spring Creek are reserved for households earning up to 60 percent of the area median income. But at the height of the real estate boom, Spring Creek’s owner was hoping to sell the community, which had originally been built in 1989 with low-income housing tax credits (LIHTCs). The owner had already raised the rents on close to a hundred of Spring Creek’s apartments by as much as $400 a month.

Development partners Domain and The Arker Cos. paid $16.9 million in 2006 for Spring Creek, or $29,000 per unit. They also spent $42,000 per unit to improve the buildings. That included peeling off cracked “panelized” façades and repairing extensive water damage underneath. The developers also decked out Spring Creek’s community spaces with new computers, pool tables, and flat-screen TVs—along with a suite of programs from tutoring and mentoring to games and social gatherings.

The developers paid for the $52.7 million plan with a tax-exempt bond mortgage and $16.6 million from the sale of 4 percent LIHTCs, plus grants and seller financing.

Spring Creek also became more energy efficient thanks to $2 million in funding from the New York State Energy Research and Development Authority and the state’s Weatherization Assistance Program, one of the largest combined awards ever given to a single project.

Better security and enforcement of the building rules also made Spring Creek a safer place to live, as the apartments went from being 85 percent occupied to being full with hundreds of people on the waiting list. —Bendix Anderson

Florida Portfolio Rescued

MIAMI A carefully orchestrated transaction by the Preservation of Affordable Housing, Inc. (POAH), recently saved more than 800 units of affordable housing.

The apartments became threatened when Greater Miami Neighborhoods, a large nonprofit developer and owner, went out of business after more than 20 years.

POAH, a Boston-based nonprofit specializing in rescuing and preserving affordable housing, used a variety of tools, including a well-managed bankruptcy proceeding, buttressing of the seller, and cross-subsidization of the properties, to acquire five developments. Two were at risk of converting to market-rate, and the others were in danger of falling into deeper disrepair. Four are Sec. 8 properties.

The transaction shows the kind of solutions that may be increasingly necessary as the recession hits the affordable housing industry. In the wake of the failure of Greater Miami Neighborhoods, “it was also important to show that there are other strong nonprofits out there,” says Amy Anthony, president and CEO of POAH.

The seller and POAH worked together on a court-supervised bankruptcy. POAH structured the “earnest money” deposits on the property so they could be used to fund the seller’s operations, keeping it going on a skeleton crew to allow for a Chapter 11 restructuring bankruptcy rather than a liquidation bankruptcy.

The deal involved 846 units, of which 828 are affordable, and cost nearly $49 million, which includes new and restructured debt. New taxable financing came from Fannie Mae with Prudential Multifamily Mortgage, Inc., as the conduit lender and new amortizing subordinate debt from the Local Initiatives Support Corp.

The properties are Campbell Arms in Homestead; Middletowne Apartments in Orange Park; and Cutler Manor, Cutler Meadows, and New Horizons in Miami. —Donna Kimura

Villa Nueva Focuses on Community

SAN YSIDRO, CALIF. For for-profit Steadfast Cos. and nonprofit Casa Familiar, the preservation of Villa Nueva Apartments was about more than keeping the 398-unit development affordable. It also was about revitalizing and serving the residents and the community.

Many of the residents had lived at the property for decades, with the average residency being 17 years. Steadfast brought its construction and management expertise to the $77 million project, while Casa brought its experience in the community and resident focus to it.

“This project would not have gotten done if we didn’t have each other. It was a joint effort from the get-go with each of us bringing our respective strengths,” says Christopher Hilbert, senior vice president of Steadfast.

Villa Nueva was originally constructed in 1970 under the Department of Housing and Urban Development’s Sec. 221(d)(3) program, and the regulatory agreement was set to expire. By combining tax credits and tax-exempt bonds, and obtaining a new 20-year Housing Assistance Payment contract, the developers were able to keep rents affordable for the lowest-income residents.

The developers focused on community and energy efficiency during the rehab. They created a 21,000-square-foot community center, which houses a day care, a computer lab, and classroom and meeting facilities. Also, the community center and the services are not just open to the residents, but for low-income residents in the San Ysidro community.

The development also features one of the largest photovoltaic systems installed at a multifamily property. The system supplies approximately 70 percent of the entire property’s electrical needs.

“It’s a beautiful place. But the most significant transformation is that sense of community is coming back again,” says Lisa Cuestas, Casa programs officer. —Christine Serlin