Torrance, Calif. — A 180-unit seniors community has found a way to overcome age and safety concerns.
Built in 1972, Golden West Tower had been well maintained over the years, but the 14-story building needed fire-safety and seismic improvements because of its age and changes to various building codes.
This created a financial and liability issue for the faith-based nonprofit owner. Many affordable housing owners face a similar situation as their properties age. It’s particularly challenging for nonprofit organizations that have limited funds.
In this case, the sale of the property was seen as a solution. Allied Pacific Development, Inc., an affordable housing developer based in Seattle, became interested in purchasing the building, but the Department of Housing and Urban Development’s (HUD) approval was needed because the department typically does not allow nonprofit owners to prepay their loans. HUD had provided a 40-year Sec. 236 loan for the project. There were about nine years left on the obligation, said Stephen Whyte, president of Allied Pacific, the development arm of Pacific Housing Advisors, a development consultant on affordable housing deals.
People familiar with the project felt the building’s needs couldn’t wait that long, so they began working with HUD to allow for the sale. The move had strong support from department officials in Los Angeles, but the deal needed the consent of HUD leaders in Washington, D.C. It took about a year to obtain the necessary approvals, but the team finally got the go-ahead to sell the property. One of the provisions was that the nonprofit owner had to reinvest the sale proceeds in affordable housing in Southern California.
The approximately $25 million deal was financed with 4% low-income housing tax credits and tax-exempt bonds. The Richman Group Affordable Housing Corp. provided about $7.4 million in tax credit equity. The bonds were issued by the California Housing Finance Agency (CalHFA), which provided a $14.1 million bond loan supported by project income and a $1.12 million loan supported by an interest reduction payment decoupling. CDR Financial Products provided a “HAP overhang guarantee,” according to Whyte, which essentially serves as a guarantee just in case the federal government ceases to fund the Housing Assistance Payment program that provides rent subsidies for 178 of the project’s units.
Allied Pacific served as the project developer and sponsor. The nonprofit managing general partner in the deal is Affordable Housing Access, Inc., based in Newport Beach, Calif.
Golden West Tower underwent a complicated and extensive seismic upgrade, which involved adding thick concrete shear walls to the building perimeter. The new owners added fire sprinklers and alarms throughout the building and renovated individual apartments with new cabinets, appliances and bathroom fixtures. The renovation cost approximately $67,000 per unit.
Relocating residents was easy. An extended-stay hotel is located next door to the apartments, so residents stayed there for about two weeks while their units were being renovated.
Under the deal, the project’s affordability has been assured for another 55 years.