NEW BEDFORD, MASS.—This June, residents moved back into the first 50 finished apartments in the redevelopment of the United Front Homes.
“It's coming to life again,” said Donald Gomes at the ribbon cutting.
Gomes is vice president of the United Front Development Corp. (UFDC), the local nonprofit and residents' group that originally co-developed the property in the 1970s under the federal Sec. 236 program.
The 200 crumbling apartments have needed renovation for years. Local journalists at SouthCoastToday.com called the project a relic of the Urban Renewal era and “an almost walled-in community,” built on an 11-acre superblock in the heart of New Bedford.
The property also had a reputation for crime. “Every time something went wrong in that part of town, they would blame it on United Front,” says Gomes.
For more than 10 years, AIMCO, a national real estate investment trust, owned a stake in the United Front Homes.
By 2008, the United Front Homes were losing more than $200,000 a year, and more than a quarter of the apartments were vacant. Worse, the property had fallen behind in its mortgage payments to the state housing agency and faced foreclosure, according to UFDC.
UFDC spent years looking for a partner that would include it, and the residents UFDC represents, in the redevelopment process. UFDC joined with Boston-based Preservation of Affordable Housing (POAH) in 2008.
“So far, it's the marriage made in heaven,” says Gomes.
POAH took over the management of the community in 2008 while the partners gathered financing to buy out AIMCO.
To keep the property out of foreclosure, UFDC and POAH negotiated a forbearance agreement on its mortgage with MassHousing.
POAH also contributed more than $200,000 of its own equity to the property's operating reserves.
The police department emerged as another important partner in the redevelopment, which includes a 500-square-foot police substation.
“We immediately started regular meetings with the police,” says Rodger Brown, development adviser for POAH. The police provided extra foot patrols through the property.
The changes had an immediate effect. “Once you have responsive property management and the residents see that, and the neighbors and police and city see that, things start to build their own momentum,” says Brown.
The police department was an important ally as the developers negotiated with local planners. For example, the police helpfully made the case that keeping some streets narrow would reduce speeding through the property.
In 2009, the partners closed on the property's financing, bought the property from AIMCO for $6.3 million, and started construction.
Work will be finished on 173 energy- efficient apartments in 2012. The first 50 were finished in June. New streets cutting through the old superblock will open by the end of October, and another 50 apartments will open by the end of this year.
Paying for it
The project will cost a total of $42.5 million to develop.
The key to raising that money was finding a buyer for the property's 9 percent low-income housing tax credits— not easy to do in early 2009.
“We had slim prospects. We were talking to a lot of people, but no one was committing,” says POAH's Brown.
JPMorgan Chase eventually paid $17.6 million, or 68 cents on the dollar, for the project's $26 million reservation tax credits.
“It's going to be a wonderful place to live,” says Rep. Barney Frank (D-Mass.), whose congressional district includes New Bedford.
The Massachusetts Department of Housing and Community Development (DHCD) provided another $10.4 million in soft financing raised through the federal Tax Credit Exchange Program. DHCD raised the funds for the loan by exchanging tax credits with the federal government that were unrelated to the United Front project, according to Brown.
“Back in 2009, deals were dying by the truckload,” he says.
The developers also sold five-year Massachusetts State Housing Tax Credits for $5.4 million, or 65 cents on the dollar, to Unum Group, a national insurance company based in Chattanooga, Tenn.
The complicated financing also includes a $7.4 million package of loans, including a permanent mortgage, soft financing, seller financing from AIMCO, and a loan underwritten with the old Sec. 236 interest reduction payment, which was decoupled from the original mortgage and remains on the property.
“It took a lot of work, but it was worth it,” says Gomes.