L+M Development Partners and IMPACCT Brooklyn, formerly known as the Pratt Area Community Council, have preserved 56 scattered-site buildings with 492 units of affordable housing in some of the borough’s rapidly changing neighborhoods.
The PACC Resyndication reorganized the small, aging Brooklyn buildings in neighborhoods such as Fort Greene, Clinton Hill, and Bedford-Stuyvesant into one viable financial structure leveraging tax credit equity and tax-exempt bond financing.
“Clinton Hill and Bedford-Stuyvesant are two examples of neighborhoods where New Yorkers are feeling squeezed out by rising rents, overcrowding, and a lack of affordable housing options, among other issues,” says Jeff Moelis, director at L+M Development Partners. “The transaction will preserve a source of stable, affordable homes for nearly 500 families who would otherwise be vulnerable to displacement.”
Prior to the current refinancing, IMPACCT Brooklyn and another nonprofit owned and operated the portfolio. IMPACCT Brooklyn assumed ownership after the other nonprofit dissolved and partnered with L+M to benefit from the developer’s experience.
As part of the refinancing, the portfolio’s existing debt, which included 26 loans totaling more than $33 million, was restructured as a new mortgage. The $82.2 million deal, which closed in June 2015, was financed through a combination of New York City Housing Development Corp. (HDC)–issued tax-exempt bonds, indirect subsidy provided by the New York City Department of Housing Preservation and Development, 4% low-income housing tax credits, a seller’s note provided by IMPACCT Brooklyn, and a deferred developer fee. National Equity Fund was the tax credit syndicator, and Citi Community Capital provided a standby letter of credit and purchased the tax credits.
"This tax credit resyndication merged multiple buildings into one project and used tax exempt bonds to rehabilitate the properties, greatly improving the quality of these homes while maintaining their long-term affordability. This project exemplifies the work we are doing through Housing New York to lock in affordability across the city, providing stability and protection to existing tenants,” said HDC President Gary Rodney.
Moelis says combining the scattered-site projects into one portfolio also allowed the team to preserve a greater number of units while utilizing economies of scale during the renovation and ongoing management of the buildings.
“For example, it allows for greater buying power in terms of contracts and, during construction, allows us to mobilize our contractors more efficiently,” he notes.
Construction is ongoing and is anticipated to wrap up later this year. The buildings were all constructed between 1899 and 1931, with the condition of the portfolio varying from poor to average. The average rehab cost is $49,500 per unit, which includes updated kitchens and bathrooms as well as new appliances. Building-wide improvements include window replacement, façade pointing, and roof and boiler replacement.
“The renovation work we're doing serves not only to improve the quality of life for residents, but also to extend the useful life of the buildings in an effort to preserve them for future generations,” adds Moelis.
The buildings include a mix of unit types, from studios to four-bedrooms, and serve residents earning 60% of the area median income. Upon vacancy, 20% of the units will be reserved for formerly homeless families.