Starrett City Saga Ends

AFFORDABLE HOUSING FINANCE • January/February 2010

Plus, more happenings from around the Northeast

BY AFFORDABLE HOUSING FINANCE Staff

The 46-building, 5,881-unit Starrett City sits on 140 acres and is the nation’s largest federally assisted property. It also has its own power plant, as well as a commercial center, several schools, parks, and community centers.

The end of the year brought some positive news for affordable housing in New York City.

The saga of Starrett City finally reached a conclusion, and it’s a happy ending for all those involved.

Wells Fargo has originated a $531.4 million refinancing loan for the massive affordable housing complex in Brooklyn, N.Y., through Freddie Mac’s Capital Markets Execution program. The loan is the largest single-asset affordable housing loan in Freddie Mac’s history, and allows the owners to pull out a substantial sum of equity while agreeing to keep the complex affordable for the next 30 years.

In a twist of fate, Alan Wiener, managing director of Wells Fargo Multifamily Capital, oversaw the transaction. Wiener was instrumental in getting Sec. 8 subsidies for the complex when he was director of the Department of Housing and Urban Development’s (HUD) New York office in 1979. “So now we come full circle, and it’s only right,” says Wiener, who worked for about six months on the refinancing. “There were a few bumps in the road in trying to get this deal done, but we got there. The owners refinanced, and the preservation aspect of it is really the most important, I think.”

The new 10-year loan paid off an existing $215 million mortgage, and featured a 5.77 percent interest rate and a debt-service coverage ratio of 1.25x. As part of the refinancing, the owners agreed to set aside $40 million for capital improvements and another undisclosed amount of reserves for long-term capital improvements, and sign a 30-year commitment to keep it in the Mitchell-Lama housing subsidy program. Signed into law in 1955 in New York, the program was designed to promote the development and building of affordable housing, both rental and co-operatively owned, for middle-income residents.

The loan consisted of two phases: a $389 million obligation supported by the property’s net operating income (equal to 65 percent of the property’s value), and another $143 million obligation supported solely by the interest reduction payments under HUD’s Sec. 236 program.

Goldman Sachs commits $61 million to NY fund

The Goldman Sachs Urban Investment Group announced in December that it had invested $61 million in the New York Equity Fund (NYEF), the largest single investment in the fund’s history.

NYEF is a joint venture between the Department of Housing Preservation and Development, Enterprise Community Investment, Inc., and the Local Initiatives Support Corp.

The investment will help support the rehabilitation of 568 units of affordable rental homes in New York City, primarily in Harlem, Brooklyn, and the Bronx.

“[Goldman Sachs’ investment] is terrific in the sense that it is going to finish up a program that’s been incredibly successful and has improved units into high-quality affordable housing. This is the last round and the last fund,” says Abby Jo Sigal, vice president and impact market leader in Enterprise Community Partners’ New York office.

Sigal says it would have been a challenge to close the fund if Goldman Sachs hadn’t stepped in.

For the past 20 years, NYEF has invested $1.6 billion to support New York City’s efforts to build and preserve affordable rental housing. NYEF has created 24,000 homes for residents earning less than 60 percent of the area median income, or less than $46,800 for a family of four.

“This program has been transformative not only for the buildings and residents, but for the neighborhoods,” Sigal says. “It has had a huge stabilizing effect.”

Founded in 2000, the Goldman Sachs Urban Investment Group deploys the firm’s capital though investments and loans that benefit low- and moderate- income people and communities.

Goldman Sachs is increasing its low-income housing tax credit (LIHTC) investing in the wake of establishing Goldman Sachs Bank USA at the end of 2008. That’s given the corporation a growing Community Reinvestment Act obligation.

“Since that time, we’ve increased staffing in this area and built out a community development finance team,” said Dan Nissenbaum, COO of the firm’s Urban Investment Group, in an interview with AFFORDABLE HOUSING FINANCE in fall 2009. “At a time when there is general contraction across the industry in lending and in investments, particularly in the LIHTC, we’ve actually been increasing the volumes in our community reinvestment programs, and in particular the LIHTC.”

NYC HDC board OKs housing bonds

Also at the beginning of December, the New York City Housing Development Corp.’s (HDC) board of directors approved $850 million in tax-exempt and taxable multifamily housing revenue bonds for the construction and permanent financing of affordable housing developments.

Approximately $500 million from Series N and O Bonds will be issued to the New Issue Bond Purchase (NIBP) Program, the new federal program announced by the Treasury, Fannie Mae, and Freddie Mac to provide below-market financing for housing finance agencies across the nation to issue new housing bonds to fund mortgage loans.

The 2009 Series K Bonds will not exceed $150 million and will be used to provide first position construction and permanent financing at a fixed rate not to exceed 7 percent. An additional $115 million will be used under HDC’s Low-Income Affordable Marketplace Program (LAMP) for the development or rehab of six developments with 800 units in Manhattan, Brooklyn, and the Bronx, and $20 million will be used for the acquisition and rehab of two developments with 230 units in the Bronx under the New Housing Opportunity Program.

Another $15 million from the 2009 Series K Bonds will provide additional construction and permanent financing for the rehab of two developments with 475 units in Brooklyn, also under LAMP. These developments were initially fi- nanced in 2003, but they now require additional funds from a combination of new and recycled private-activity bond volume cap.

The remaining $50 million from the 2009 Series M Bonds will be used to refund a portion of the multifamily housing revenue bonds, 2008 Series A-1-B, and convert those bonds to fixed rate from floating rate.

New York governor approves bond sale

New York Gov. David Paterson announced in mid-December that the state had approved the sale of $665.2 million in housing bonds to the federal government as part of the NIBP Program.

The Treasury agreed to purchase $665.2 in bonds from the New York State Housing Finance Agency (HFA) and the State of New York Mortgage Agency (SONYMA) in November; $389 million of the bonds will be sold by SONYMA for single-family mortgages and $276 million will be sold by the HFA for multifamily rental mortgages.

Two New York officials resign

Deborah VanAmerongen will leave her post as commissioner of the New York State Division of Housing and Community Renewal to join the Nixon Peabody, LLP, law firm.

She is set to join the firm’s affordable housing practice as a strategic policy adviser Feb. 1. VanAmerongen will work closely with attorneys to assist developers, owners, and managers of affordable housing, as well as their financing partners, nationwide. She will be based in the firm’s New York office.

“We think she’s going to be a perfect fit for the group,” said Stephen J. Wallace, leader of the practice. “Her background and expertise is in line with the same type of practice that we’ve built over the years.”

Paterson praised VanAmerongen for her years of public service, saying that she has helped to author landmark legislation and implement new programs to help revitalize communities and help families avoid foreclosure. “Perhaps her greatest achievement is helping to negotiate the recently completed refinancing of Starrett City, which will keep nearly 6,000 households affordable for an additional 30 years,” he said.

Paterson also announced Dec. 4 that Priscilla Almodovar, president and CEO of the state HFA and SONYMA has resigned her position, to which she had been appointed in January 2007.

“President Almodovar has more than doubled the number of affordable housing units financing during her three years of leadership compared to the previous three years and has become a leading voice in New York state’s housing community,” he said in a statement. —Staff reports