NORMANDY, MO. — For more than 200 individuals and families, their homes are indeed a castle.
They are living at the Castle Park Apartments, a historic building that was recently renovated and preserved as aff ordable housing by owner Community Housing Concepts, Inc. (CHC), a Denver-based nonprofit that holds more than 20 properties.
“It is far and away the most complicated project that we have done,” says Hud Karshmer, a principal at Steele Properties, which served as the developer. “There were a lot of moving pieces.”
After about five years of work at the drawing board and on the ground, the $27.3 million acquisition and rehabilitation project was set to celebrate its grand reopening in May.
Acquired from AIMCO in 2007 as part of a pool of seven aff ordable properties, Castle Park is a one-of-akind building listed on the National Register of Historic Places. Built in 1891 as the St. Vincent's Sanitarium for persons with nervous and mental diseases, and later termed St. Vincent's Institution for the Insane, the property housed patients until 1982 when it was sold and converted into apartments.
With its brick exterior and towers, the building looks just like a storybook castle.
The tale of Castle Park has also been rich with plot twists. CHC and Steele originally planned to finance the acquisition and rehabilitation with 9 percent low-income housing tax credits (LIHTCs). However, due to changes in the tax credit process in Missouri, the 9 percent credit execution became unattainable, forcing the team to explore every other financing option available, according to the developers.
Eventually, a complex package of 12 public and private financing sources, including 4 percent housing tax credits, tax-exempt bonds, state and federal historic tax credits, Tax Credit Assistance Program (TCAP), tax credit replacement funds, and St. Louis County HOME funds, was assembled during one of the most difficult financial climates.
The housing tax credits, TCAP, and tax credit replacement funds came from the Missouri Housing Development Commission (MHDC).
To add to the complexity, there was a transfer of second and third mortgages via the Department of Housing and Urban Development (HUD) Mark-to- Market program. Prior to CHC's ownership, the property went through the program, which aims to preserve the rental aff ordability on properties by restructuring HUD-held mortgages. As the new owner, the nonprofit is maintaining those loans.
The tax-exempt bonds provided a large piece of the financing, roughly $14 million. That debt is essentially acting as a construction loan that will be paid off from the tax credit proceeds, says Karshmer. The nonprofit itself also stepped in to provide $3.4 million in loans to the project.
This was important because it allows the deal to avoid hard or “forecloseable” debt, a point that was important to the financing team, according to Karshmer, and that helps ensure long-term preservation of the important housing resource.
The partners involved in the deal include U.S. Bank NA, which provided the private placement on the bonds, and U.S. Bancorp Community Development Corp. (USBCDC), which invested approximately $11 million of low-income housing and historic tax credit equity.
“This redevelopment was an attractive investment opportunity for U.S. Bank, considering the historic nature of the building, the necessity of multifamily housing options for the Normandy community, and the collaborative mind-set of all those involved in the deal,” says Vihar Sheth, LIHTC investment senior business development officer for USBCDC. “Despite a complex financing structure, the developers, MHDC, the lender, and U.S. Bank were able to work together to save this historic structure and improve the building for its residents.”
Once the financing closed, the team spent 2011 renovating the castle, which features Italian marble floors, a tile slate roof, and copper gutters. Because of the age of the property, extensive work was needed to rehab and preserve the property. “There wasn't much we didn't touch,” Karshmer says.
About $13 million went into the renovation, including repairs to the structural foundation. The exterior work also features new windows, masonry repairs, and copper metal repairs. Inside, all the apartments received new kitchens and bathrooms, including new fixtures, cabinets, flooring, and energy-efficient appliances.
Officials at Steele say the work was critical to preserving the property as a historic building and as a source for aff ordable housing. All the apartments are project-based Sec. 8 units, so residents pay 30 percent of their income toward rent.
Demand for aff ordable housing is high in Normandy, where approximately 37 percent of the residents are below the poverty line.
“The lessons we learned is the need to persevere and keep working past what seems to be insurmountable problems,” Karshmer says. “If you work with partners, you achieve solutions.”