NEW YORK CITY—Nearly 450 apartments in 14 buildings will remain affordable for decades to come under a new $75 million transaction.
The buildings were part of the Harlem Congregations for Community Improvement, Inc. (HCCI), portfolio that was renovated in the 1990s and had reached the expiration of their low-income housing tax credit (LIHTC) compliance period.
The recent transaction, which includes a new round of LIHTCs, provides capital to complete a comprehensive rehabilitation and ensures that the apartments remain affordable for the next 30 years.
“It's a good model in New York City and other municipalities for repositioning expiring credits,” says Ron Moelis, co-founder and CEO of L+M Development Partners, Inc.
HCCI, a coalition of more than 90 congregations, initially pitched L+M to step in and manage the properties, but after a review of the situation the two firms agreed that L+M, an experienced private affordable housing developer and owner, would buy into the partnership.
The buildings, which have 447 affordable units, were originally part of six separate ownership and financial structures. Under the new structure, the ownership entities are combined into a single joint venture between HCCI and L+M, and the existing subordinate debt financing is assumed by the new firm.
Restructuring the portfolio was challenging because the city had roughly $40 million in soft debt in the buildings, says Moelis.
The developers worked with the New York City Department of Housing Preservation and Development (HPD), New York City Housing Development Corp. (HDC), New York State Homes and Community Renewal, and Goldman Sachs Urban Investment Group.
The transaction is financed under Mayor Michael Bloomberg's New Housing Marketplace Plan, an $8.5 billion initiative to finance 165,000 units of affordable housing by the close of fiscal 2014.
“The city through HPD, our sister agency, and HDC have been involved in restructuring other deals, but this is at a scale unlike we've done before,” says HDC President Marc Jahr.
Rolling six separate partnerships into one will provide greater efficiency in property management and regulatory compliance, according to Jahr.
The deal restructures the existing debt and provides new funds to rehab the apartments and ensure they remain affordable for many years to come, he says. About $13.5 million in rehab work is planned on the buildings, which are clustered between West 145th and West 153rd streets between Seventh and Eighth avenues in Harlem.
HDC issued $38 million in tax-exempt bonds during construction. The permanent fi- nancing includes a $39.1 million first mortgage from HDC and HPD, which is a restructuring of the existing debt. HPD also provided a $6.2 million second mortgage loaned into the project through HDC, and the Housing Trust Fund Corp. restructured its existing debt of $6.1 million into a third mortgage.
The deal also includes $19.5 million in equity from the sale of 4 percent LIHTCs to investor Goldman Sachs.
L+M will handle the day-today operations of the portfolio. Over the years, the firm has developed more than 9,500 housing units.
NEW FIRM CLOSES FIRST DEAL
Preservation Development Partners has acquired its first project, the 75-unit Trinity Apartments in the Bronx.
The deal reflects the new company's emphasis on acquiring and preserving housing developments at risk of losing their affordability.
“We're going to focus on lowincome housing and keeping it affordable for 30 to 40 years down the road," says Principal Francine Kellman.
With the cost of new construction being so prohibitive in these times of belt tightening, it is important to preserve existing affordable housing, she says.
The $15 million transaction was financed with $9.9 million in New Issue Bond Program bonds from the New York City Housing Development Corp. and $5.3 million in 4 percent low-income housing tax credit (LIHTC) equity from Wells Fargo and credit-enhanced by Freddie Mac thorough its LIHTC mod-rehab program.
The property was a Department of Housing and Urban Developmentfinanced project that was nearing the end of its original mortgage.
Reserved for families earning no more than 60 percent of the area median income, Trinity Apartments has 23 one-bedroom, 33 two-bedroom, nine three-bedroom, and nine fourbedroom apartments as well as a superintendent's unit. A project-based Sec. 8 contract has been renewed for 20 years.
The development also features a full-service day-care center that serves residents and the surrounding community.
Preservation Development Partners plans to spend about $30,000 per unit to renovate the property, including providing new kitchens and bathrooms.
The firm is a new partnership formed by K&R Preservation and BFC Partners. K&R is owned by Kellman and Brian Raddock.