Community Preservation Partners (CPP) has closed on the financing to preserve six rural affordable housing developments in central New Mexico. The transaction marks the final installment in a deal involving 20 properties with 654 units across 10 counties.
CPP serves as the fee developer for J.L. Gray Co., an experienced affordable housing operator in the state.
The central portfolio comprises 218 units across four family and two senior properties in the cities of Artesia, Belen, Las Vegas, Portales, and Ruidoso Downs. Affordability at the properties, which serve residents earning no more than 60% of the area median income, will be extended for another 35 years.
“In New Mexico, it is extraordinarily difficult for affordable housing communities in rural areas to secure the financing they need to address maintenance and rehabilitation,” said Anand Kannan, CPP president. “With our experience in rural development, CPP was able to arrange the smaller communities into portfolios that would meet both the mortgage finance authority and the rural development requirements to make a reinvestment possible.”
The overall portfolio has a cost of about $63.26 million, with $29.65 million in bond financing. It is believed to be the largest 4% low-income housing tax credit (LIHTC) and bond deal in the state.
CPP, which has worked on several New Mexico deals dating back to 2010, recognized the need to preserve these assets as well as difficulties of reinvesting in small, rural communities, said Karen Buckland, vice president of development.
To tackle the large deal, the team divided the properties into three groups—north, south, and central portfolios. All are U.S. Department of Agriculture (USDA) Section 515 properties built between 1978 to 1984.
Pooling several properties into a large bond transaction has become a strategy for financing the rehabilitation of rural developments. On its own, one small project would have a tough time raising the necessary funds. By grouping multiple properties, a developer can create a larger and more efficient deal that makes bond financing feasible.
"A lot of these small, rural assets are challenged with finding financing, and they don't often pencil when you look at them as stand alones, so you need to group them," Buckland said.
In this latest deal, CPP is overseeing the $32,000 per unit renovation, which includes energy-efficient improvements such as new windows, interior/exterior lighting, and fully upgraded kitchens. Common rooms and offices will be upgraded, and outdoor playgrounds and gathering areas will be added. Exterior improvements include new roofs, metal staircases, and paint, and accessibility will be addressed throughout the properties. Construction is expected to be completed in August 2022.
“CPP navigated the complex and challenging process of gaining approvals through the state and county offices to close on the largest 4% bond deal in the state of New Mexico,” said Bobby Griffith, chief financial officer and principal of J.L. Gray Co. “Thanks to their expertise and tenacity over the past three years, we are able to preserve more than 650 homes for families and seniors in these hard-to-reach areas.”
The company had an interest in the bulk of properties at some point.
Financing partners for the central portfolio include Bonneville, which is providing a Section 538 USDA guaranteed loan, bond underwriter Stifel, and bond issuer New Mexico Mortgage Finance Authority, which also allocated the LIHTCs. WNC is the LIHTC syndicator. USDA Rural Development is subordinating the existing Section 515 loans.