Community HousingWorks (CHW) executed a sophisticated financing model to prevent a long-standing affordable housing development from converting to market-rate housing.
Azusa Apartments in Azusa, Calif., was built in 1971 utilizing a federal Sec. 236 loan and then refinanced in 1994 with a Sec. 241(f) loan. With affordability restrictions having ended and the owner eligible to prepay the 241(f) loan, the property was at risk of losing its affordability status and displacing nearly all 88 families, including more than 100 children, when nonprofit CHW stepped in to acquire the property.
The seller wanted a quick execution on the sale, so CHW purchased the property in July 2013, with bridge financing from U.S. Bank and NeighborWorks Capital Corp. With this financing in place, the team was able to work on securing permanent financing, layering 9% low-income housing tax credit equity from Union Bank, a Federal Housing Administration-insured Sec. 221(d)(4) mortgage from RED Mortgage Capital, and a long-term project-based Sec. 8 contract.
“It is significant that CHW could purchase the property with bridge financing in a competitive market and then execute on a complex yet replicable financing model to get needed capital into the community,” says Lisa Huff, project manager.
The $31.1 million project included critical renovations at an aging property that had not seen any significant rehabilitation. The result has created a new “sense of place” and a more sustainable development for residents.
In addition to rehabbing the apartment units, the team redesigned an underutilized community building, adding a new computer center. This has allowed the developer to bring in resident services, including an after-school program. Another area of improvement involved energy efficiency. The property, which received new roofs and a photovoltaic system, has seen a 27% reduction in energy demand and a 34% reduction in water use. ICON Builders was the general contractor.
“We’ve been focused on building our equity resources so we can act in a fast, market-driven manner but then take the time to do a very complex, very thorough execution that is the best thing for the ultimate preservation of the asset and the residents,” says Dave Gatzke, vice president of acquisitions.