SANTA ANA, CALIF. — Nonprofit LINC Housing Corp. and Enterprise Community Investment, Inc., have closed the first loan under the Green Refinance Plus program, a partnership between Fannie Mae and the Department of Housing and Urban Development.
The program, which was announced a year ago, allows owners of existing affordable rental housing developments to refinance into mortgages that include financing for energy-efficient upgrades.
The $19.4 million refinance loan, which closed in April with a 10-year term and 30-year amortization, brings the City Gardens development full circle for Hunter Johnson, president and CEO of LINC. It was the first project he worked on when he started at the company more than 15 years ago. LINC purchased the Orange County property, which was built in 1969, in 1996 with tax-exempt bonds and 4 percent low-income housing tax credits with Edison Capital as the investor. At the time, a fair amount of rehab had been done, and it has been maintained over the years.
Now, Johnson has taken the 274- unit family development all the way to Year 15 and refinancing.
The total rehab cost is slated to be $2.8 million, including approximately $520,000 for the green retrofitting. The rest of the loan proceeds include: $11.6 million toward existing debt, $4.1 million to purchase the limited partner's interest, and the remainder for replacement reserves and other fees.
Jay Helfrich, director of multifamily mortgage finance at Enterprise, adds that this deal was “a perfect example in timing” for LINC and that Year 15 deals are prime targets for this loan program.
“Where the property is coming up to Year 15, it can benefit greatly from higher loan proceeds that come out of this program,” he says. “And I think that developers that are upgrading everything from lighting to irrigation to water fixtures to appliances that are more energy efficient and water conserving make a lot of sense.”
Improvements for City Gardens include the replacement of old, inefficient gas-fired furnaces with Energy Star-rated furnaces, roofs, and balconies; the installation of low-flow plumbing fixtures, energy-efficient lighting, and a solar hot water heating system; the addition of green landscaping; and an upgrade to a more efficient irrigation system. The development team is being aggressive and hopes to have the rehab done by the end of the year or the first quarter of 2013.
In terms of energy efficiency, Johnson says he anticipates a combined 20 percent savings from the retrofits for the common area and in the residents' units. As part of the Fannie Mae loan program, energy costs must be monitored, and the development team is working with residents to put together a program to track the savings on a monthly basis through Energy Scorecard software.
The team also is working to educate the children in the community about the rehab.
“We have an after-school program, and we're going to get the children involved,” says Johnson. “They'll start learning about the green improvements and the effects that they'll have on their homes and the environment. That's going to be a critical piece through construction.”
And beyond this rehab, both partners will continue to push ahead with their green missions.
Enterprise is working to green all affordable housing by 2020, and LINC has a major initiative planned to retrofit its entire portfolio to be more energy efficient over the next several years.
