TCAP Pushes Denver Project Forward

AFFORDABLE HOUSING FINANCE • January/February 2010

BY DONNA KIMURA

The rehabilitation of Denver Gardens, including the addition of solar panels and other green products, is scheduled to be completed around the end of April.

DENVER
Community Housing Concepts, Inc. (CHC), has purchased and preserved the affordability of a 100-unit seniors housing development after working on the deal for years.

The project, which includes the addition of solar panels and other renovations, likely wouldn’t have happened without the help of the Tax Credit Assistance Program (TCAP).

CHC used $1.7 million in TCAP funds to fill a gap in the project’s $14 million budget. The deal closed last September, making it the first TCAP project in Colorado and among the first in the country to be funded.

More important, the deal needed to be done because the nonprofit organization that owned Denver Gardens was ready to sell the 30-year-old property, and the Housing Assistance Payment (HAP) contract was set to expire in 2011.

Denver Gardens is home to a large number of Russian immigrants, and about 90 percent of the residents earn below 30 percent of the area median income.

The owner of 1,500 affordable units in five states, CHC had been working on purchasing the property for several years. “We had a lot of support for it, but we never had all of the support at the same time,” says President Hud Karshmer.

The project took a leap forward in 2009 when CHC received a reservation of 9 percent low-income housing tax credits (LIHTCs). However, a drop in tax credit prices left a sizable funding gap.

TCAP, which was created under the American Recovery and Reinvestment Act of 2009, is filling that hole. The $2.25 billion program was included in the stimulus package to help in just such cases to spur development activity.

Financing details

The Colorado Housing and Finance Authority (CHFA) provided Denver Gardens with a $758,970 LIHTC award plus the TCAP funds.

The program has been absolutely critical in jump-starting stalled deals, according to Jaime Gomez, director of commercial lending at CHFA.

“Our biggest challenge was meeting the closing deadline,” says Karshmer, “Between CHFA and our development partners, everybody on the team put everything else on the side and got all the agreements done.”

CHC had a fast-approaching deadline with the seller. If the group missed that deadline, it would have lost its right to buy Denver Gardens. In the end, CHC was able to close within about three months of receiving the LIHTCs.

CHC and its partner, Steele Properties, are updating the apartments with energy-efficient windows and appliances and photovoltaic panels. Grant money from the Governor’s Energy Office and Energy Outreach Colorado are helping fund the green features.

Denver’s Road Home has also pledged money to assist residents who are formerly homeless or at risk of homelessness.

WNC & Associates raised about $5.5 million in LIHTC equity.

“The speed with which CHFA implemented this new financing tool was astounding,” says Michael Byrd, a project manager at WNC. The TCAP funds leveraged the other financing and pushed the deal forward, he adds.

Citi Community Capital provided a $3.4 million Fannie Mae loan as a Fannie Mae Delegated Underwriting and Servicing lender.

“I believe this deal would not have closed without TCAP money,” says Brian Dale, a director at Citi. “This project was important in that it significantly upgraded the quality of the project-based Sec. 8 units for seniors and extended the life of the HAP contract. It was a very good preservation deal and a good use of the resources.”

CHFA, which is administering the state’s $27.3 million in TCAP funds, received 19 applications, requesting $31 million in funding. At the end of January, it had approved 15 applications for $25.1 million in funding, with the vast majority being new construction projects, reports Gomez. Two of these deals had closed and been funded, with the others expected to close in 60 days. On average, TCAP is filling a gap of about 12 percent in total development costs.