A mixed-income and mixed-use development that will bring 449 apartments to the Southwest neighborhood of Washington, D.C., is under construction.
Waterfront Station II is a joint venture between the for-profit Hoffman & Associates, nonprofit affordable housing developer AHC, as well as City Partners and Paramount Development.
One of the key financing partners is Merchants Capital, which recently announced that it has secured more than $141 million for the development.
Waterfront Station II will feature 313 market-rate apartments and 136 affordable homes, including 68 units available to households earning no more than 30% of the area median income (AMI) and 68 units for households earning up to 50% of the AMI.
Made possible through an innovative financing model, the affordable housing units are being financed using both 4% and 9% low-income housing tax credits (LIHTCs). Ninety-four of the total affordable units are being financed with 4% LIHTCs, while 42 units are being financed with the 9% LIHTCs.
The full development will consist of a 12-story apartment building with approximately 29,000 square feet of retail, educational, and commercial space on the ground level with below-grade parking. The commercial space is anchored by AppleTree Public Charter School, a D.C.-based early childhood education provider, and a neighborhood restaurant by Good Company Doughnuts, with an additional 7,000 square feet of retail space available for lease.
Land acquisition occurred in 2020, at which time the Waterfront Station II development team executed a 99-year ground lease with the District’s Office of the Deputy Mayor for Planning and Economic Development.
Merchants Capital is helping finance the property with three Merchants Bank of Indiana (MBI) construction loans totaling $141.25 million: a $123.5 million loan, a $2 million loan for the construction of the 9% LIHTC units, and a $15.4 million 4% LIHTC loan required for the tax-exempt bond financing. In addition, Merchants provided financing for three separate Fannie Mae 42-month forward commitments for the permanent financing. Each forward commitment had different loan terms to meet the requirements of the market rate, the 9% LIHTC, and the 4% LIHTC units, as well as the goals of the borrowers and equity investors.
“This was an immensely complex deal with unique bond structures, three construction loans, three forward commitments, LIHTC twinning, three ground leases, master lessor/lessee structure, real estate
