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Affordable Housing FinanceSPECIAL FOCUSReaders' Choice Finalists Preservation FinalistsAFFORDABLE HOUSING FINANCE • July/August 2010
ASHLAND VILLAGE
Photo: Chandra Smith for Weir/Andrewson Associates, Inc. Developer: Eden Housing, Inc.
SAN LEANDRO, CALIF.— The acquisition and rehab of Ashland Village started out as a no-brainer for Eden Housing, Inc., says Executive Director Linda Mandolini. The owner of the Sec. 8 property in the unincorporated area of Ashland in Alameda County had passed away, and its Sec. 8 contract was up for expiration March 31, 2009. The owner’s sons did not want to keep the project but wanted it to remain as affordable housing. However, in the 12 months before closing, the project’s original lender went out of business; California froze state bond sales, including the Proposition 1C Multifamily Housing Program bond financing that was providing a $7.7 million permanent loan for the project; and a technical violation of the tax credit’s 10-year rule due to the inheritance structure created another snag. But the stars aligned for Eden. The lending team at Bank of America stepped in to fill the void. Bank of America agreed to underwrite the loans without the Prop. 1C program’s deeper income targeting, and Alameda County agreed to increase its permanent loan by $5 million to bridge the potential gap during construction. And Reps. Barbara Lee and Pete Stark (D-Calif.) rallied to keep legislation regarding the reform of the 10- year rule in the Housing and Economic Reform Act of 2008. Eden closed on the project in March 2009, with its 4 percent low-income housing tax credit investor holding its pricing at $0.98 for more than a year. Renovations of the $34 million project include unit and exterior upgrades as well as a new community room. The project-based Sec. 8 contract was renewed; 53 percent of the 142 units are for residents earning 35 percent of the area median income (AMI), 40 percent at 50 percent of AMI, and 7 percent at 60 percent of AMI. —Christine Serlin CHANCELLOR MANOR
Developer: Community Housing
Development Corp.
BURNSVILLE, MINN.— Chancellor Manor, built in 1972 and the largest project-based Sec. 8 development in Dakota County, has been undergoing an extreme makeover during the past year. The project had been plagued over the years with security problems and a high volume of police calls. In a third-ring suburb, it would have made a good location for market-rate conversion, but nonprofit Community Housing Development Corp. (CHDC) stepped up to the plate by acquiring the project in July 2009, preserving 200 Sec. 8 units primarily for families, and committing to improve the property as well as the property’s public image. Chancellor Manor’s 14 buildings received new roofs, windows, fiber cement siding, and entry porches as well as increased security and lighting, and hallway improvements. Many detached garages on the interior of the property were removed to provide better site lines and to address safety concerns. Landscaping improvements also have been made, including two new tot lots and new formal paths between buildings. Dick Brustad, vice president of CHDC, also emphasizes the project’s services. CHDC has partnered with local nonprofit 360 Communities to provide services such as English as a Second Language classes for adults and homework help for students. He adds that the school district and police department have also been very involved in helping to transform Chancellor Manor. “This development has a whole new life,” Brustad says. All units are targeted to residents earning less than 60 percent of the area median income. The Department of Housing and Urban Development provides project-based rental assistance for 196 units, and 10 units have been designated for longterm homeless. The $29.2 million project was financed with a Minnesota Housing Preservation Affordable Rental Investment Fund loan, a Dakota County Housing Opportunities Enhancement Program loan, low-income housing tax credits allocated by the Dakota County Community Development Agency (CDA) and purchased by U.S. Bank Community Development Corp., and a first mortgage underwritten by the Dakota County CDA. —Christine Serlin MALDEN ARMS APARTMENTS
Developer: Mercy Housing Lakefront
CHICAGO— Many encouraged Mercy Housing Lakefront to sell its Malden Arms Apartments, which is located in the Uptown neighborhood that has rapidly gentrified over the last several years. Median condo prices jumped 60 percent from 2000 to 2005, taking away many lowincome efficiencies and forcing many individuals onto the streets and into shelters. “The mission is our business, and our business is the mission,” says Cindy Holler, president of Mercy Housing Lakefront. “A business without the mission would have sold the building or turned it into market-rate condos. Our mission is to preserve affordable housing.” The property, originally built in the 1920s, had first been transformed into supportive housing by Mercy Housing Lakefront’s predecessor, Lakefront Supportive Housing, in 1991. The low-income housing tax credits originally used expired in 2006, and the project was losing $100,000 per year because of rent caps, limited rental subsidies, and high operating costs. The nonprofit decided to resyndicate, recapitalize, and rehab the 83-unit project in 2008 to ensure that it could serve very lowincome people for the next 20 years. Mercy Housing Lakefront received Long-Term Operating Support Subsidy and a Low-Income Housing Trust Fund grant from the city of Chicago to cover all but 10 units so that residents pay no more than 30 percent of their income on rent. For the $6.4 million project, the nonprofit closed on tax credit resyndication with the Illinois Housing Development Authority and tax credit investor National Equity Fund, Inc. And the in-place rehab featured numerous cost-saving and green elements, of which Holler says she would like to see a 25 percent annual savings. As part of a pilot project for the Clinton Climate Initiative and the city of Chicago’s Multi-Family Energy Retrofit Program, Malden Arms now features new Energy Star appliances, energy-effi cient lighting, low-flow water fixtures, energyeffi cient air conditioning, high-efficiency water heaters and boilers, and a reflective membrane on the roof to reduce its heat island effect. —Christine Serlin MONTEVERDE APARTMENTS
Developer: Greater Baltimore AHC, Inc.
BALTIMORE— Greater Baltimore AHC, Inc. (GBAHC), suffered its share of blows acquiring and rehabbing MonteVerde Apartments during the worst recession since the Great Depression. Formerly known as Greenhill Housing, the 301 units for low-income seniors were in danger of being lost when the owner had agreed to sell to an investor who planned to convert the apartments to market-rate condos. But the deal fell through, and GBAHC won the bid. After HOME funds from the city of Baltimore fell through, GBAHC raced to restructure the financing, negotiating an 18-year variable-rate bond issue with a construction letter of credit from SunTrust Bank and a forward commitment for the credit enhancement from Freddie Mac for the permanent financing on the $29 million project. GBAHC also lobbied Baltimore for a PILOT to reduce the property’s annual tax bill by $200,000 per year for 40 years. The closing date had been set for Sept. 12, 2008, but was rescheduled after Freddie had been placed in conservatorship. Merrill Lynch, which was the remarketing agent for the bonds, was then purchased by Bank of America on Sept. 14. Despite the upheaval of the financial world, GBAHC was able to close after 18 months of negotiations less than one week after the original closing date. The property was in need of major recapitalization, with 100 units off-line at the time of the acquisition. GBAHC worked with the residents to keep them in place while it transformed the two stark buildings into a more homey environment. The rehab included the creation of lounges to give residents a sense of place, updated kitchens and bathrooms, and new carpeting. New HVAC systems, energy-efficient windows, and Energy Star lighting fixtures also were installed. Since MonteVerde is a project-based Sec. 8 property, residents pay no more than 30 percent of their income for rent. “It’s been a long struggle with a great ending,” says GBAHC Director Andrew Vincent. “Pride has returned to the residents, and they want other people to see where they live.” —Christine Serlin
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