The nation’s first Green and Resilient Retrofit Program (GRRP) transaction has closed, paving the way to make improvements at a senior housing community in Quincy, Massachusetts.
The complex transaction also involved a Rental Assistance Demonstration (RAD) conversion and a Federal Housing Administration (FHA)-insured Section 223(f) loan. The deal will finance a new energy-efficient HVAC system and make accessibility improvements at Wollaston Lutheran Church’s Bauer House, a subsidized residence for independent seniors, according to the Nixon Peabody law firm, which represented the property owner in the deal.
The 75-unit property was built in 1995 under the federal Section 202 program for elderly housing.
The transaction helps preserve needed senior housing in Quincy, says Alex Rosso, Nixon Peabody affordable housing and real estate partner, who co-led the firm’s deal team with partner Kathie Soroka.
Established as part of the Inflation Reduction Act of 2022, the GRRP is one of the newest funding sources for affordable housing owners and developers. Under the program, the Department of Housing and Urban Development (HUD) will provide more than $837 million in grants and loans for efficiency and resiliency improvements at eligible multifamily properties.
HUD has three paths of funding available to meet the needs of properties at all stages of redevelopment—Elements, Leading Edge, and Comprehensive. As of late March, the agency has awarded $544.4 million in funding—$240.1 million in grants and $304.3 million in surplus cash loans— to 109 properties through six of 12 planned funding rounds, according to a recent update.
Bauer House received a $750,000 grant under the Elements cohort, which provides funding for owners to include proven and meaningful climate resilience and utility efficiency measures in projects that are in the process of a recapitalization transaction. Elements provides up to $40,000 per unit or $750,000 per property.
In addition, the Bauer House team combined the GRRP grant with a RAD for PRAC (project rental assistance contract) conversion, which allows eligible Section 202 properties to convert their PRACs that need to be renewed annually to project-based rental assistance for 20 years. This provides long-term stability for the property and increases access to private capital for repairs.
The other key piece was the FHA-insured Section 223(f) loan originated by Hampden Park Capital and made by Lument Real Estate Capital.
It was unique to close all three facets together, says Rosso, noting that a number of other deals are in the process of securing a GRRP award after having closed on their main financing several months or a year ago.
The Bauer House team began the bulk of its work in January and closed on the transaction in April, according to Rosso.
For this deal, it was important to work on all three components together because the team needed to sequence the closings and have the GRRP go first. “The project only qualified for GRRP funding before it converted through RAD,” says Soroka, who previously served as a senior counsel at HUD and helped design the RAD program.
Even with the complexities involved, Soroka says she expects to see more deals combining RAD for PRAC and GRRP funds.
“RAD for PRAC projects are hard to pencil out,” she says. “They’re not easy projects to accomplish. To have access to an additional source of funding could be the piece that pushes some of the RAD for PRAC deals over the finish line.”
The team also worked to ensure that all the financing partners understood and agreed on the timing for the release of the GRRP grant so their underwriting could reflect those funds.
These are some of the challenges that come with utilizing multiple financing programs, especially one for the first time, says Rosso, crediting HUD staff for ironing out any issues.
“The GRRP component did exactly what it was designed to do,” adds Soroka. “It brought in additional funds to allow further energy-efficiency work to be added into the project and benefited the project as a whole.”
More GRRP transactions are expected to close in the months ahead, and HUD has scheduled additional application rounds this year.
In Quincy, officials are looking forward to improving Bauer House and ensuring its affordability.
“We consider ourselves very fortunate to have partnered with an amazing team of professionals and unrelenting advocates at Nixon Peabody and Hampden Park for this first in the nation transaction,” says Tim Wismar, president and executive director of Wollaston Lutheran Church’s WLC Management Co. “We thank HUD for the opportunity to improve the lives of the seniors at Bauer House and ensure rent affordability for many years to come.”
In addition to Rosso and Soroka, the Nixon Peabody team included senior counsel Jeffrey Sacks and senior paralegal Christine Brosonski.
