Key financing has been lined up for a massive effort to transform 1,400 public housing units in San Francisco.
Bank of America Merrill Lynch was selected by the city and San Francisco Housing Authority as the lender and low-income housing tax credit (LIHTC) investor for the project and will provide several community development partners with access to approximately $770 million in financing. Freddie Mac is its partner in the deal.
The commitment ranks among the bank’s largest community development efforts.
“It’s an opportunity to play a role in funding the preservation of more than 1,400 units in a city that has a tremendous need for affordable housing,” says Maria Barry, community development executive at Bank of America Merrill Lynch.
The initiative features 15 projects across the city. Seven development teams are involved in this first phase, including BRIDGE Housing, Chinatown Community Development Center, Community Housing Partnership, The John Stewart Co., Mercy Housing California, Related California, and Tenderloin Neighborhood Development Corp.
The sweeping effort is part of the Department of Housing and Urban Development’s Rental Assistance Demonstration (RAD) program. RAD is the centerpiece of HUD’s strategy to preserve at-risk public and assisted-housing developments. The first component allows public housing and Sec. 8 Mod-Rehab properties to convert to long-term Sec. 8 rental assistance contracts. The second component allows Rent Supplement, Rental Assistance Payment, and mod-rehab properties to convert tenant-based vouchers issued upon contract expiration or termination to project-based assistance.
When a development obtains long-term rental assistance through RAD, it has a more stable funding platform, which puts the property in a better position to leverage additional financing to perform capital improvements.
Bank of America Merrill Lynch was selected to be the financing partner by the city, San Francisco Housing Authority, and their development partners through a request for proposal process. Under its winning bid, the bank will provide:
· Approximately $350 million in construction financing;
· Approximately $300 million in LIHTC equity;
· $20 million in subordinated, forgivable debt;
· $2.2 million to provide services to public housing residents;
· $500,000 to Enterprise Community Partners to assist the RAD developers;
· $5 million for predevelopment loans; and
· Approximately $100 million in permanent financing from Freddie Mac.
“Freddie Mac is a leader in providing financing for HUD's RAD program, and we are pleased to work with Bank of America Merrill Lynch to provide almost $100 million under our Direct Purchase of Tax-exempt Loan offering to support the city of San Francisco's efforts to transform its public housing stock,” says David Leopold, Freddie Mac Multifamily vice president of affordable housing production.
Enterprise will lead an effort to change how public housing is managed, engaging with residents in decision making, implementing anti-poverty strategies, and increasing accessibility for public housing residents to the broader community and its resources. They will also provide ongoing support and communication to the residents after the RAD conversion is complete.
The S.F. RAD initiative is important to Bank of America for several reasons, according to Barry.
“This project is transformative,” she says. “It enables us to pull together all of the capabilities of our firm and deliver solutions that meet the city’s needs and enable the development to go forward.”
Bank of America, which was founded in San Francisco in 1904, has shown a strong commitment to the Bay Area, providing $654 million from 2002 to 2014 in economic development financing and approximately 36% of the LIHTC units in the city, according to officials.
